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Causality on Outward Foreign Direct Investment and Domestic Investment in Newly Industrialized Asian Countries

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  • Wang Tsung-Li

    (Shu-Te University of Taiwan)

  • Hung-Pin Lin

    (Shu-Te University of Taiwan)

  • Cheng-Lang Yang

    (Nanhua University of Taiwan)

Abstract

For the past two decades, outward foreign direct investment (OFDI) from newly industrialized countries has substantially increased. Given the role of physical capital accumulation in determining economic growth, it is crucial to evaluate how domestic investment (DI) responds to OFDI. This study empirically examined the effects of OFDI and DI in newly industrialized Asian countries, using data from 1990 to 2011. The results suggested that: (1) a short- run unidirectional causality running from DI to OFDI exists in China, Japan, and South Korea; (2) both long-run and strong unidirectional causalities running from OFDI to DI exist in Singapore and Taiwan; (3) only China exhibits both long-run and strong unidirectional causalities running from DI to OFDI; (4) policies for promoting OFDI may not affect DI in Indonesia, Malaysia, Philippines, and Thailand. Finally, policy implications are provided in the final section of this study

Suggested Citation

  • Wang Tsung-Li & Hung-Pin Lin & Cheng-Lang Yang, 2017. "Causality on Outward Foreign Direct Investment and Domestic Investment in Newly Industrialized Asian Countries," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(2), pages 267-280.
    • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:2:p:267-280
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    References listed on IDEAS

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    Cited by:

    1. Dong, Zhixiao & Miao, Zhuang & Zhang, Yan, 2021. "The impact of China’s outward foreign direct investment on domestic innovation," Journal of Asian Economics, Elsevier, vol. 75(C).
    2. Xiaoxu Dong & Cheon Yu & Yun Seop Hwang, 2021. "The Effects of Reverse Knowledge Spillover on China’s Sustainable Development: Sustainable Development Indicators Based on Institutional Quality," Sustainability, MDPI, vol. 13(4), pages 1-17, February.
    3. Safet Kurtović & Nehat Maxhuni & Blerim Halili & Bujar Krasniqi, 2022. "Does outward foreign direct investment crowd in or crowd out domestic investment in central, east and southeast europe countries? an asymmetric approach," Economic Change and Restructuring, Springer, vol. 55(3), pages 1419-1444, August.

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    More about this item

    Keywords

    Causality; Co-integration; Domestic investment (DI); outward foreign direct investment (OFDI).;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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