IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0301220.html
   My bibliography  Save this article

Exploring the nexus between FDI inflows and economic growth: A sectoral level analysis

Author

Listed:
  • Guo ai-jun
  • A K M Mohsin
  • Sayed Farrukh Ahmed
  • Mst Shumshunnahar
  • Arifur Rahman
  • Ebrahim Abbas Abdullah Abbas Amer
  • Hasanuzzaman Tushar

Abstract

This study investigates the relationship between Foreign Direct Investment (FDI) inflows and economic growth at sectoral levels in Bangladesh, employing a panel study framework. Utilizing sectoral-level panel data spanning six sectors from 2007–08 to 2018–19, the analysis is conducted using Panel Vector Error Correction Model (Panel VECM). Results from panel unit root tests confirm that all variables are integrated of order one I (1), indicating stationarity. The Pedroni panel co-integration test further supports the presence of co-integration among the variables. Notably, the Panel VECM reveals evidence of a unidirectional causal relationship from Real Gross Domestic Product (RGDP) to Real Foreign Direct Investment (RFDI) across all six sectors of Bangladesh. The findings underscore the significance of formulating pragmatic policies and implementing them effectively to attract FDI across sectors, thereby contributing to the overall economic growth of Bangladesh.

Suggested Citation

  • Guo ai-jun & A K M Mohsin & Sayed Farrukh Ahmed & Mst Shumshunnahar & Arifur Rahman & Ebrahim Abbas Abdullah Abbas Amer & Hasanuzzaman Tushar, 2024. "Exploring the nexus between FDI inflows and economic growth: A sectoral level analysis," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-14, May.
    • Handle: RePEc:plo:pone00:0301220
    DOI: 10.1371/journal.pone.0301220
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0301220
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0301220&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0301220?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Brian J. Aitken & Ann E. Harrison, 2022. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 6, pages 139-152, World Scientific Publishing Co. Pte. Ltd..
    2. Miao Wang, 2009. "Manufacturing FDI and economic growth: evidence from Asian economies," Applied Economics, Taylor & Francis Journals, vol. 41(8), pages 991-1002.
    3. Miao Wang, 2010. "Foreign direct investment and domestic investment in the host country: evidence from panel study," Applied Economics, Taylor & Francis Journals, vol. 42(29), pages 3711-3721.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Mesut Eren & Hong Zhuang, 2015. "Mergers and Acquisitions Versus Greenfield Investment, Absorptive Capacity, and Economic Growth: Evidence from 12 New Member States of the European Union," Eastern European Economics, Taylor & Francis Journals, vol. 53(2), pages 99-123, March.
    6. Henrik Hansen & John Rand, 2006. "On the Causal Links Between FDI and Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 29(1), pages 21-41, January.
    7. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    8. Abdul Khaliq & Ilan Noy, 2007. "Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia," Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
    9. Li, Xiaoying & Liu, Xiaming, 2005. "Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship," World Development, Elsevier, vol. 33(3), pages 393-407, March.
    10. Rosemary Stanley Taylor, 2020. "Foreign direct investment and economic growth. Analysis of sectoral foreign direct investment in Tanzania," African Development Review, African Development Bank, vol. 32(4), pages 699-717, December.
    11. Chakraborty, Chandana & Nunnenkamp, Peter, 2008. "Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis," World Development, Elsevier, vol. 36(7), pages 1192-1212, July.
    12. Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April.
    13. Ashoka Mody, 2004. "Is FDI Integrating the World Economy?," The World Economy, Wiley Blackwell, vol. 27(8), pages 1195-1222, August.
    14. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    15. Jože Mencinger, 2003. "Does Foreign Direct Investment Always Enhance Economic Growth?," Kyklos, Wiley Blackwell, vol. 56(4), pages 491-508, November.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Ebrahim Abbas Abdullah Abbas Amer & Zhang Xiuwu & Ebrahim Mohammed Ali Meyad & Ali M Meyad & A K M Mohsin & Arifur Rahman, 2024. "The long-term relationship between oil price changes and economic growth from the perspective of the resource curse: An empirical study from Yemen," PLOS ONE, Public Library of Science, vol. 19(11), pages 1-23, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohammad Sharif Karimi & Andrzej Cieslik, 2017. "Foreign Knowledge Spillovers and Total Factor Productivity Growth: Evidence from Four ASEAN Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(2), pages 267-299, Spring.
    2. Ausloos, Marcel & Eskandary, Ali & Kaur, Parmjit & Dhesi, Gurjeet, 2019. "Evidence for Gross Domestic Product growth time delay dependence over Foreign Direct Investment. A time-lag dependent correlation study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 527(C).
    3. Shima’a Hanafy & Marcus Marktanner, 2019. "Sectoral FDI, absorptive capacity and economic growth – empirical evidence from Egyptian governorates," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(1), pages 57-81, January.
    4. Clark Don P. & Highfill Jannett & de Oliveira Campino Jonas & Rehman Scheherazade S., 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-44, July.
    5. Bashir Ahmad Joo & Sana Shawl, 2023. "Understanding the Relationship Between Foreign Direct Investment and Economic Growth in BRICS: Panel ARDL Approach," Vikalpa: The Journal for Decision Makers, , vol. 48(2), pages 100-113, June.
    6. Hiep Ngoc Luu, 2016. "Greenfield investments, cross-border M&As, and economic growth in emerging countries," Economics and Business Letters, Oviedo University Press, vol. 5(3), pages 87-94.
    7. M. Tahir Suleman & M. Talha Amin, 2015. "The Impact of Sectoral Foreign Direct Investment on Industrial Economic Growth of Pakistan," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 2(1), pages 102-123, March.
    8. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
    9. Mouna Gammoudi & Mondher Cherif & Simplice Asongu, 2016. "FDI and Growth in the MENA countries: Are the GCC countries Different?," Working Papers of the African Governance and Development Institute. 16/015, African Governance and Development Institute..
    10. Edouard Mien, 2023. "Statistical Overview and Empirical Literature on Foreign Direct Investment in Developing Countries WP326," Working Papers hal-04123985, HAL.
    11. Oktay KIZILKAYA & Ahmet AY & Gökhan AKAR, 2016. "Dynamic relationship among foreign direct investments, human capital, economic freedom and economic growth: Evidence from panel cointegration and panel causality analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(608), A), pages 127-140, Autumn.
    12. Burcu Turkcan & I. Hakan Yetkiner, 2010. "Endogenous determination of FDI growth and economic growth: the OECD case," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 5(4), pages 409-429.
    13. Noy, Ilan & Vu, Tam B., 2007. "Capital account liberalization and foreign direct investment," The North American Journal of Economics and Finance, Elsevier, vol. 18(2), pages 175-194, August.
    14. Beugelsdijk, Sjoerd & Smeets, Roger & Zwinkels, Remco, 2008. "The impact of horizontal and vertical FDI on host's country economic growth," International Business Review, Elsevier, vol. 17(4), pages 452-472, August.
    15. Edward Nketiah-Amponsah & Bernard Sarpong, 2019. "Effect of Infrastructure and Foreign Direct Investment on Economic Growth in Sub-Saharan Africa," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 11(3), pages 183-201, September.
    16. Shima'a Hanafy & Marcus Marktanner, 2015. "Sectoral FDI, Absorptive Capacity and Economic Growth — Empirical Evidence from Egyptian Governorates," MAGKS Papers on Economics 201537, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    17. Tommaso Sonno & Davide Zufacchi, 2025. "Large-scale land acquisitions: Trees, trade and structural change," CEP Discussion Papers dp2075, Centre for Economic Performance, LSE.
    18. Emre Gökçeli & Jan Fidrmuc & Sugata Ghosh, 2022. "Effect of Foreign Direct Investment on Economic Growth and Domestic Investment: Evidence from OECD Countries," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 8(2), pages 190-216.
    19. Jeffrey A. Edwards & Alfredo A. Romero & Zagros Madjd-Sadjadi, 2016. "Foreign direct investment, economic growth, and volatility: a useful model for policymakers," Empirical Economics, Springer, vol. 51(2), pages 681-705, September.

    More about this item

    Statistics

    Access and download statistics

    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:plo:pone00:0301220. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    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.