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Foreign Direct Investment and Growth: An Empirical Investigation based on Cross-Country Comparison

Author

Listed:
  • Ozturk, Ilhan

    () (Faculty of Economics and Administrative Sciences, Cag University, Yenice, Mersin)

  • Kalyoncu, Huseyin

    () (Department of Economics, Nig˘de University)

Abstract

This paper investigates empirically the impact of FDI on economic growth of Turkey and Pakistan over the period of 1975-2004. To analyse the causal relationship between FDI and economic growth, the Engle-Granger cointegration and Granger causality tests are used. It is found that these two variables are cointegrated for both countries studied. Our empirical fi ndings suggest that it is GDP that causes FDI in the case of Pakistan, while there is strong evidence of a bi-directional causality between the two variables for Turkey.

Suggested Citation

  • Ozturk, Ilhan & Kalyoncu, Huseyin, 2007. "Foreign Direct Investment and Growth: An Empirical Investigation based on Cross-Country Comparison," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 60(1), pages 75-81.
  • Handle: RePEc:ris:ecoint:0066
    as

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    References listed on IDEAS

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    1. 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.
    2. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January.
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    5. Chowdhury, Abdur R. & Mavrotas, George, 2005. "FDI and Growth: A Causal Relationship," WIDER Working Paper Series 025, World Institute for Development Economic Research (UNU-WIDER).
    6. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
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    8. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
    9. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
    10. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-171, May.
    11. Harrison, Ann, 1994. "Multinationals in economic development: the benefits of FDI," MPRA Paper 36270, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Bilgili, Faik & Tülüce, Nadide Sevil Halıcı & Doğan, İbrahim, 2012. "The determinants of FDI in Turkey: A Markov Regime-Switching approach," Economic Modelling, Elsevier, vol. 29(4), pages 1161-1169.
    2. repec:eco:journ1:2017-04-65 is not listed on IDEAS
    3. Faruk Gürsoy & Hüseyin Kalyoncu, 2012. "Foreign Direct Investment and Growth Relationship in Georgia," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 267-271.
    4. Kumar, Sundaram, 2009. "Investigating causal relationship between stock return with respect to exchange rate and FII: evidence from India," MPRA Paper 15793, University Library of Munich, Germany.
    5. Tatomir, Cristina F. & Popovici, Oana, 2011. "Eyes on Romania: what to look when investing here?," MPRA Paper 36140, University Library of Munich, Germany.
    6. Völlmecke, Dominik & Jindra, Björn & Marek, Philipp, 2016. "FDI, human capital and income convergence—Evidence for European regions," Economic Systems, Elsevier, vol. 40(2), pages 288-307.
    7. Chanegriha, Melisa & Stewart, Chris & Tsoukis, Christopher, 2018. "Testing for causality between FDI and economic growth using heterogeneous panel data," Economics Discussion Papers 2018-4, School of Economics, Kingston University London.
    8. Ahsen Mukhtar & Muhammad Asif & Ghamz-e-Ali Siyal & Khalid Zaman, 2014. "Institutional-Macroeconomic Nexus: Inducement on Foreign Direct Investment (FDI) in Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(11), pages 465-479, November.
    9. Syed Imran Ali Meerza, 2012. "Causal links between trade, foreign direct investment and economic growth for Bangladesh," SDSU Working Papers in Progress 12012, South Dakota State University, Department of Economics.

    More about this item

    Keywords

    Economic growth; foreign direct investment; Granger causality;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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