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Relationships between economic growth, foreign direct investment and trade: evidence from China

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  • Xiaohui Liu
  • Peter Burridge
  • P. J. N. Sinclair

Abstract

This study investigates the causal links between trade, economic growth and inward foreign direct investment (FDI) in China at the aggregate level. The integration and cointegration properties of quarterly data are analysed. Long-run relationships between growth, exports, imports and FDI are identified in a cointegration framework, in which this paper finds bi-directional causality between economic growth, FDI and exports. Economic development, exports and FDI appear to be mutually reinforcing under the open-door policy.

Suggested Citation

  • Xiaohui Liu & Peter Burridge & P. J. N. Sinclair, 2002. "Relationships between economic growth, foreign direct investment and trade: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1433-1440.
  • Handle: RePEc:taf:applec:v:34:y:2002:i:11:p:1433-1440 DOI: 10.1080/00036840110100835
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    References listed on IDEAS

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    1. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    2. Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-698, June.
    3. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    4. Eric A. Hanushek & Dongwook Kim, 1995. "Schooling, Labor Force Quality, and Economic Growth," NBER Working Papers 5399, National Bureau of Economic Research, Inc.
    5. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    6. Nelson, Richard R, 1973. "Recent Exercises in Growth Accounting: New Understanding or Dead End?," American Economic Review, American Economic Association, vol. 63(3), pages 462-468, June.
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