IDEAS home Printed from https://ideas.repec.org/a/ids/ijecbr/v8y2014i1p1-20.html
   My bibliography  Save this article

Dynamic linkages between foreign direct investment and domestic investment: evidence from emerging market economies

Author

Listed:
  • Vipul Jain
  • Arun Kumar Gopalaswamy
  • Debashis Acharya

Abstract

This paper examines the long-run relationship between FDI inflows, FDI outflows and gross fixed capital formation, in a dynamic panel of 22 Asian, Latin American and other emerging market economies. Employing panel cointegration and causality tests, we find a mixed picture of these relationships across the three sub-samples. It is observed that a positive and significant long-run relationship exists between FDI inflows and fixed capital formation for Asian EMEs, suggesting a crowd-in effect. This finding is consistent with the complementary hypothesis of neoclassical macroeconomic growth model in which it is often thought that FDI inflows complement the domestic investment. The results for the relationship between FDI outflows and fixed capital formation indicate a significant negative long-run relationship for Asian and other EMEs. In addition, the long-run causality is observed to be bidirectional for both the samples. These results confirm the general, accepted view that FDI outflows reduce domestic investment.

Suggested Citation

  • Vipul Jain & Arun Kumar Gopalaswamy & Debashis Acharya, 2014. "Dynamic linkages between foreign direct investment and domestic investment: evidence from emerging market economies," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 8(1), pages 1-20.
    • Handle: RePEc:ids:ijecbr:v:8:y:2014:i:1:p:1-20
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=63938
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, George S. & Yao, Yao & Malizard, Julien, 2017. "Does foreign direct investment crowd in or crowd out private domestic investment in China? The effect of entry mode," Economic Modelling, Elsevier, vol. 61(C), pages 409-419.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijecbr:v:8:y:2014:i:1:p:1-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=310 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.