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Foreign direct investment and economic growth in less developed countries: an empirical study of causality and mechanisms

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  • Mousumi Duttaray
  • Amitava Dutt
  • Kajal Mukhopadhyay

Abstract

We examine the causality between foreign direct investment (FDI) and economic growth for 66 developing countries, taking into account their interaction with exports and technological change. Time series analysis for each country is conducted, based on a method introduced by Toda and Yamamoto (1995) for testing Granger causality in the presence of nonstationary time series. The main findings of this article are: FDI causes growth in several of the developing countries, but the mechanism through which this works differs across countries and reverse causality from growth to FDI exists for many countries.

Suggested Citation

  • Mousumi Duttaray & Amitava Dutt & Kajal Mukhopadhyay, 2008. "Foreign direct investment and economic growth in less developed countries: an empirical study of causality and mechanisms," Applied Economics, Taylor & Francis Journals, vol. 40(15), pages 1927-1939.
  • Handle: RePEc:taf:applec:v:40:y:2008:i:15:p:1927-1939 DOI: 10.1080/00036840600949231
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    References listed on IDEAS

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    Cited by:

    1. J. Rosell-Martinez & P. Sanchez-Sellero, 2012. "Foreign direct investment and technical progress in Spanish manufacturing," Applied Economics, Taylor & Francis Journals, vol. 44(19), pages 2473-2489, July.
    2. repec:eur:ejmsjr:202 is not listed on IDEAS
    3. repec:kap:ecopln:v:50:y:2017:i:4:d:10.1007_s10644-016-9191-0 is not listed on IDEAS
    4. repec:wsi:serxxx:v:62:y:2017:i:02:n:s0217590815500708 is not listed on IDEAS
    5. repec:bpj:glecon:v:13:y:2017:i:1:p:8:n:3 is not listed on IDEAS
    6. Nalan Baştürk & Richard Paap & Dick van Dijk, 2012. "Structural differences in economic growth: an endogenous clustering approach," Applied Economics, Taylor & Francis Journals, vol. 44(1), pages 119-134, January.
    7. repec:mgs:ijmsba:v:1:y:2015:i:5:p:38-50 is not listed on IDEAS
    8. 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.

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