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Foreign Direct Investment and Growth Relationship in Georgia

Author

Listed:
  • Faruk Gürsoy

    (International Black Sea University, Tbilisi, Georgia.)

  • Hüseyin Kalyoncu

    (Melikþah University, Kayseri, Turkey.)

Abstract

This paper aims to investigate the empirically the impact of FDI on economic growth of Georgia over the period of 1997-2010. The Engle-Granger cointegration and Granger causality tests are used in order to analyse the causal relationship between FDI and economic growth. It is crucial to see the directions of causality between two variables for the policy makers to encourage private sectors. It is found that these two variables are cointegrated. Our empirical findings suggest that it is FDI that causes GDP in the case of Georgia.

Suggested Citation

  • Faruk Gürsoy & Hüseyin Kalyoncu, 2012. "Foreign Direct Investment and Growth Relationship in Georgia," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 267-271.
  • Handle: RePEc:eco:journ1:2012-03-4
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    References listed on IDEAS

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    1. Henrik Hansen & John Rand, 2006. "On the Causal Links Between FDI and Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 29(1), pages 21-41, January.
    2. de Mello, Luiz R, Jr, 1999. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 133-151, January.
    3. Chowdhury, Abdur R. & Mavrotas, George, 2005. "FDI and Growth: A Causal Relationship," WIDER Working Paper Series 025, World Institute for Development Economic Research (UNU-WIDER).
    4. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    5. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    6. Dierk Herzer & Stephan Klasen & Felicitas Nowak-Lehmann D., 2006. "In search of FDI-led growth in developing countries," Ibero America Institute for Econ. Research (IAI) Discussion Papers 150, Ibero-America Institute for Economic Research.
    7. John K. Mullen & Martin Williams, 2005. "Foreign Direct Investment and Regional Economic Performance," Kyklos, Wiley Blackwell, vol. 58(2), pages 265-282, April.
    8. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
    9. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    10. Ozturk, Ilhan & Kalyoncu, Huseyin, 2007. "Foreign Direct Investment and Growth: An Empirical Investigation based on Cross-Country Comparison," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 60(1), pages 75-81.
    11. Ozturk, I., 2007. "Foreign Direct Investment – Growht Nexus: A Review of The Recent Literature," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 4(2), pages 79-98.
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    Cited by:

    1. repec:eco:journ1:2014-03-23 is not listed on IDEAS
    2. Temiz, Dilek & Gökmen, Aytaç, 2014. "FDI inflow as an international business operation by MNCs and economic growth: An empirical study on Turkey," International Business Review, Elsevier, vol. 23(1), pages 145-154.

    More about this item

    Keywords

    Economic growth; Foreign direct investment; Granger causality;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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