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Causality Between FDI and Economic Growth in China

Author

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  • Changwen Zhao
  • Jiang Du

Abstract

Studies on how foreign direct investment (FDI) interacts with host economic growth are obviously important. Using the vector autoregression (VAR) approach developed by Toda and Phillips, we examine the causality between FDI and growth in China by conducting time-series estimations through ADF [Augmented Dickey Fuller] unit-root tests, cointegration tests, and error-correction analyses. The result reveals that the two-way causality between FDI and growth in China is not highly significant. China's economic growth indeed attracts FDI influx, which supports the market-size hypothesis; while the FDI influx stimulates the economic growth of China to some degree, the result is not significant.

Suggested Citation

  • Changwen Zhao & Jiang Du, 2007. "Causality Between FDI and Economic Growth in China," Chinese Economy, Taylor & Francis Journals, vol. 40(6), pages 68-82, November.
  • Handle: RePEc:mes:chinec:v:40:y:2007:i:6:p:68-82
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    Cited by:

    1. repec:beo:ekidpr:y:2017:i:24:p:87-116 is not listed on IDEAS
    2. Sunde, Tafirenyika, 2016. "Foreign direct investment and economic growth: ADRL and causality analysis for South Africa," MPRA Paper 72382, University Library of Munich, Germany, revised Jun 2016.
    3. Gunby, Philip & Jin, Yinghua & Robert Reed, W., 2017. "Did FDI Really Cause Chinese Economic Growth? A Meta-Analysis," World Development, Elsevier, vol. 90(C), pages 242-255.
    4. Yalta, A. Yasemin, 2013. "Revisiting the FDI-led growth Hypothesis: The case of China," Economic Modelling, Elsevier, vol. 31(C), pages 335-343.
    5. Rubab Khan & Hijaab Zahra, 2016. "Impact of Domestic Interest Rate on Foreign Direct Investment (A case study of Pakistan)," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(4), pages 220-230, December.
    6. Tafirenyika Sunde & Paul-Francois Muzindutsi, 2017. "Determinants of house prices and new construction activity: An empirical investigation of the Namibian housing market," Journal of Developing Areas, Tennessee State University, College of Business, vol. 51(3), pages 389-407, July-Sept.
    7. Toma Lankauskienė & Manuela Tvaronavičienė, 2011. "Interrelation of countries' developmental level and foreign direct investments performance," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 12(3), pages 546-565, March.
    8. repec:gam:jsusta:v:11:y:2019:i:1:p:192-:d:194431 is not listed on IDEAS
    9. A. Yasemin Yalta, 2011. "New Evidence on FDI-Led Growth: The Case of China," Working Papers 1107, TOBB University of Economics and Technology, Department of Economics.
    10. Temiz, Dilek & Gökmen, Aytaç, 2014. "FDI inflow as an international business operation by MNCs and economic growth: An empirical study on Turkey," International Business Review, Elsevier, vol. 23(1), pages 145-154.
    11. repec:eee:riibaf:v:41:y:2017:i:c:p:434-444 is not listed on IDEAS
    12. Muhammad Irfan Chani & Muhammad Azam & Akmal Younas, 2014. "The Causal Relationship between Foreign Direct Investment, Imports and Exports in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 3(3), pages 142-149, September.

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