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The foreign direct investment–economic growth nexus

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  • Iamsiraroj, Sasi

Abstract

The nexus between foreign direct investment (FDI) and economic growth has been a long-standing debate from mixed empirical findings. There is also a possibility of a bi-directional relationship between FDI and economic growth. This paper investigates FDI–growth associations using a simultaneous system of equations approach of 124 cross-country data for the period 1971–2010. Results from the estimation indicate that overall effects of FDI are positively associated with growth and vice versa; whereas labor force, trade openness and economic freedom are other key determinants of FDI, which in turn stimulate income growth further.

Suggested Citation

  • Iamsiraroj, Sasi, 2016. "The foreign direct investment–economic growth nexus," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 116-133.
  • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:116-133
    DOI: 10.1016/j.iref.2015.10.044
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    Keywords

    Foreign direct investment; Economic growth; Paneldata;
    All these keywords.

    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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