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Effect of FDI on real per capita GDP Growth: A Rolling Window Panel Analysis of 60 countries, 1982-2011

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  • Jeffrey A. EDWARDS
  • Cephas B. NAANWAAB
  • Alfredo A. ROMERO

Abstract

The research regarding the effect that foreign direct investment (FDI) has on economic growth has morphed into a quagmire that the economics discipline can't seem to find a way out of, and in some ways, is sinking deeper into. In fact, the positive, negative, and dependent impact views many times blatantly contradict one another, leaving someone on the outside to wonder whether there may be 'something else' that is causing the differences in the empirical estimations of this effect. In this study, we employ a rolling window methodology across 60 countries that has been tailored for use with a perfectly balanced panel data set spanning 30 years, to investigate whether some of this variation in the effect FDI has on growth could be caused by shocks to the effect itself. What we find is that conservatively, 25% of our estimates are indeed dynamically sensitive, with this sensitivity continuing across economic sectors as well. In the end, at least some of this heretofore variation in the effect's estimates may simply be due to investigators ignoring significant levels of parameter heterogeneity, and nothing to do with the inherent attributes of the economies being studied.

Suggested Citation

  • Jeffrey A. EDWARDS & Cephas B. NAANWAAB & Alfredo A. ROMERO, 2017. "Effect of FDI on real per capita GDP Growth: A Rolling Window Panel Analysis of 60 countries, 1982-2011," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(1), pages 19-36.
    • Handle: RePEc:eaa:aeinde:v:17:y:2017:i:1_2
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    More about this item

    Keywords

    FDI; Growth; Economic Sectors; Rolling Window;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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