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Growth and Foreign Direct Investment in the Pacific Island countries

Author

Listed:
  • Feeny, Simon
  • Iamsiraroj, Sasi
  • McGillivray, Mark

Abstract

Achieving sustained high rates of economic growth in Pacific countries has proved incredibly challenging. Despite many being rich in natural resources, receiving high levels of foreign aid and being open to external trade, the economic growth rates of Pacific Island countries are the lowest and most volatile for all groups of developing countries. This paper examines the impact of Foreign Direct Investment (FDI) to the Pacific region. Results from the estimation of a number of empirical models suggest that the impact of FDI is lower in Pacific countries than it is in host countries on average. A 10% increase in the ratio of FDI to host Gross Domestic Product (GDP) is associated with higher growth of about 2% in all countries on average. The impact in Pacific countries falls to between 0.1 and 0.4%. A number of explanations for this finding are provided including some empirical evidence that FDI displaces domestic investment in the region.

Suggested Citation

  • Feeny, Simon & Iamsiraroj, Sasi & McGillivray, Mark, 2014. "Growth and Foreign Direct Investment in the Pacific Island countries," Economic Modelling, Elsevier, vol. 37(C), pages 332-339.
  • Handle: RePEc:eee:ecmode:v:37:y:2014:i:c:p:332-339
    DOI: 10.1016/j.econmod.2013.11.018
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    References listed on IDEAS

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    1. repec:ris:utmsje:0205 is not listed on IDEAS
    2. Amri, Fethi, 2016. "The relationship amongst energy consumption, foreign direct investment and output in developed and developing Countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 694-702.
    3. Hiep Ngoc Luu, 2016. "Greenfield investments, cross-border M&As, and economic growth in emerging countries," Economics and Business Letters, Oviedo University Press, vol. 5(3), pages 87-94.
    4. Mouna Gammoudi & Mondher Cherif & Simplice Asongu, 2016. "FDI and Growth in the MENA countries: Are the GCC countries Different?," Working Papers 16/015, African Governance and Development Institute..
    5. Hichem Saidi & Khaled Guesmi & Houssem Rachdi, 2016. "Capital Account Liberalization, Financial Development and Economic Growth in Presence of Structural Breaks and Cross-Section Dependence," Economics Bulletin, AccessEcon, vol. 36(4), pages 2225-2236.
    6. Magombeyi, Mercy Tsitsi & Odhiambo, Nicholas Mbaya, 2017. "Dynamic impact of FDI inflows on poverty reduction:Empirical evidence from South Africa," Working Papers 22006, University of South Africa, Department of Economics.
    7. Metaxas, Theodore & Kechagia, Polyxeni, 2016. "Literature review of 100 empirical studies of Foreign Direct Investment: 1950-2015," MPRA Paper 71414, University Library of Munich, Germany.
    8. Brito, Joao, 2015. "Country Size and Determinants of Economic Growth: A Survey with Special Interest on Small States," MPRA Paper 61273, University Library of Munich, Germany.
    9. repec:ibn:ijefaa:v:9:y:2017:i:5:p:132-142 is not listed on IDEAS
    10. repec:eee:ecmode:v:72:y:2018:i:c:p:296-305 is not listed on IDEAS

    More about this item

    Keywords

    Foreign Direct Investment; Economic growth; Pacific;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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