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The Relationship between Gross Domestic Product and Foreign Direct Investment: The Case of Cambodia


  • Lim GuechHeang

    () (Pannasastra University of Cambodia, Phnom Penh, Cambodia.)

  • Pahlaj Moolio

    () (Pannasastra University of Cambodia, Phnom Penh, Cambodia.)


Foreign Direct Investment (FDI) is widely believed to have positive effects on economic growth; yet for Cambodia, over 19 years (1993-2011) of attracting FDI inflows, the growth rate of Gross Domestic Product (GDP) has averaged at 7%, which demand a modest attempt to study their relationship whether FDI drives growth of Cambodia’s economic output. This paper aims to examine the relationship between foreign direct investment and gross domestic product of Cambodia in long run over the period of 1993-2011 by using simple regression analysis, Augmented Dickey-Fuller test, Durbin-Watson test, Breusch-Godfrey Serial Correlation LM test, Breusch-Pagan-Godfrey test, and Jarque-Bera test. The result from regression found that there is a positive relationship between FDI and GDP in the long run in Cambodia, which is also supported by qualitative studies that is based on the collection of existing studies from recognized domestic and international institutions, people in senior positions, and researchers. All of the qualitative studies presented in this paper claim that FDI positively affects GDP, and most significantly, to the employment opportunities generated for local people, which in the long run help unemployment and poverty reduction in Cambodia. However, GDP growth rate has averaged at 7% over 19 years although the influx of FDI inflows dramatic increase probably because of the internal factors of Cambodia, particularly the limited absorptive capability of the advanced technology.

Suggested Citation

  • Lim GuechHeang & Pahlaj Moolio, 2013. "The Relationship between Gross Domestic Product and Foreign Direct Investment: The Case of Cambodia," KASBIT Business Journals, Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 6, pages 87-99, December.
  • Handle: RePEc:ksb:journl:v:6:y:2013:p:87-99

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    Cited by:

    1. Saba Jameel & Muhammad Zahid Naeem, 2016. "Impact of Human Capital on Economic Growth: A Panel Study," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(4), pages 231-248, December.

    More about this item


    FDI; GDP; Foreign Investment; Domestic Investment; Growth;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications


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