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The Effects of FDI and Public Expenditure on Economic Growth: From Theoretical Model to Empirical Evidence

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  • Manh Vu LE
  • Terukazu Suruga

Abstract

The existing endogenous growth theory considers either the effects of FDI or public expenditures on economic growth separately. As far as we concerned, no theoretical growth model has taken into account the interaction effect of these two factors. As found out by Le and Suruga (forthcoming), there is evidence that excessive spending in public expenditures can hinder the beneficial impact of FDI. This article examines some other potential relationships between FDI and public expenditure and proposes that more efforts should be contributed in building a theoretical model which presents the interrelationship between these factors in determining the long-term economic growth rate.

Suggested Citation

  • Manh Vu LE & Terukazu Suruga, 2005. "The Effects of FDI and Public Expenditure on Economic Growth: From Theoretical Model to Empirical Evidence," GSICS Working Paper Series 2, Graduate School of International Cooperation Studies, Kobe University.
    • Handle: RePEc:kcs:wpaper:2
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    File URL: http://www.research.kobe-u.ac.jp/gsics-publication/gwps/2005-02.pdf
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    Cited by:

    1. Lenuta CARP, 2012. "Analysis Of The Relationship Between Foreign Direct Investments And Economic Growth – Case Of Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 9, pages 175-188, June.
    2. Mahmoud Khalid Almsafir & Zurina Mohammad Morzuki, 2015. "The Relationship between Investment and Economic Growth in Malaysia," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 4(2), pages 116-126.
    3. Ali Acaravci & Sinan Erdogan & Guray Akalin, 2015. "The Electricity Consumption, Real Income, Trade Openness and Foreign Direct Investment: The Empirical Evidence from Turkey," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 1050-1057.
    4. Rudra P Pradhan, 2011. "Determinants of Foreign Direct Investment in SAARC Countries: An Investigation Using Panel VAR Model," Information Management and Business Review, AMH International, vol. 3(2), pages 117-126.

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    More about this item

    Keywords

    Theory; Foreign direct investment; Public expenditures; Economic growth;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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