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Dynamic Relationship Between Growth, Foreign Direct Investment and Exports in the US: An Approach with Structural Breaks

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  • Stylianou Tasos

Abstract

One of the well-studied areas in development economics is the relationship between Foreign Direct Investment (FDI) and economic growth. Recently, a renewed interest has been observed in growth determinants and externality-led growth, with the advent of endogenous growth theories (Barro, 1991; and Barro and Sala-i-Martin, 1995). Under this framework, it is more plausible to include FDI as one of the determinants of long-run economic growth. The present paper investigates the relationship (long run and short run) between economic growth, FDI and exports for the US economy. To achieve this objective, Johansen maximum likelihood procedure is used. The results show the presence of one cointegrating vector. Further, the results of Bai-Perron test reveal two structural breaks, and that of block exogeneity Wald test show causality running from exports to GDP and FDI, and also from GDP to FDI.

Suggested Citation

  • Stylianou Tasos, 2014. "Dynamic Relationship Between Growth, Foreign Direct Investment and Exports in the US: An Approach with Structural Breaks," The IUP Journal of Applied Economics, IUP Publications, vol. 0(2), pages 23-37, April.
    • Handle: RePEc:icf:icfjae:v:13:y:2014:i:2:p:23-37
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