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The Impact of Foreign Direct Investment on Economic Growth : A Case Study of Ireland

Author

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  • Kyuntae Kim

    (Korea Institute for International Economic Policy)

  • Hokyung Bang

Abstract

This study examines the long-run and the short-run relationships between foreign direct investment and economic growth in Ireland. Using an augmented aggregate production function growth model, we applied the bounds testing approach to cointegration, which is more appropriate for estimating small sample studies. The data span for the study is from 1975 to 2006. The results indicate that foreign capital (FDI), domestic capital, and trade are statistically significant in both the long-run and the short-run, having positive effects on economic growth in Ireland. The causality analysis also suggests that there is a bi-directional Granger causality between GDP and FDI, and thus, we conclude that the FDI-led growth hypothesis is valid for the Irish economy.

Suggested Citation

  • Kyuntae Kim & Hokyung Bang, 2008. "The Impact of Foreign Direct Investment on Economic Growth : A Case Study of Ireland," Development Economics Working Papers 22993, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:develo:22993
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    References listed on IDEAS

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    Cited by:

    1. Fambon, Samuel, 2013. "Foreign Capital Inflow and Economic Growth in Cameroon," WIDER Working Paper Series 124, World Institute for Development Economic Research (UNU-WIDER).
    2. Frank Adusah-Poku, 2016. "Which Form of Foreign Capital Inflows Enhance Economic Growth? Empirical Evidence in Sub-Saharan Africa," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(10), pages 557-570, October.
    3. Cruz Mejía, Jose Vidal & Cruz-Rodríguez, Alexis, 2020. "Impacto de la inversión extranjera directa en el crecimiento económico, las exportaciones y el empleo de República Dominicana [Impact of foreign direct investment on economic growth, exports and em," MPRA Paper 100990, University Library of Munich, Germany.
    4. Frank Adusah-Poku & William Bekoe, 2018. "Does the Form Matter? Foreign Capital Inflows and Economic Growth," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 61(3), pages 39-74.
    5. Mowlaei , Mohammad, 2017. "Foreign Capital Inflows and Economic Growth of Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(1), pages 37-54, January.
    6. Samuel Fambon, 2013. "Foreign Capital Inflow and Economic Growth in Cameroon," WIDER Working Paper Series wp-2013-124, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    FDI; Ireland; Cointegration; Unit Roots; Bounds Test; Error Correction Models; Granger Causality;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F10 - International Economics - - Trade - - - General
    • C00 - Mathematical and Quantitative Methods - - General - - - General

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