IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/72834.html
   My bibliography  Save this paper

Are FDI Inflows Complements or Substitutes Across Borders: Empirical Evidence from Five Asian Countries

Author

Listed:
  • Hansen, Henrik
  • Rand, John
  • Tarp, Finn

Abstract

The inflow of foreign direct investment (FDI) in Asian countries increased rapidly during the 1980s and 1990s, and a vast literature has found a positive association between FDI inflows and growth for developing countries, noting a series of threshold effects. Less attention has been paid in the literature to whether developing countries are competing or complementing each other in ongoing efforts to stimulate FDI inflows. In this paper we therefore study the causality between growth and FDI in a sample of five Asian countries and uncover the co movements of FDI shares in the region using a vector autoregressive (VAR) model. It emerges clearly that Granger causality exists from growth to FDI, and FDI flows are indeed strongly interrelated in the Asian region. Significant policy relevant differences among individual countries in our sample and the rest of Asia are also revealed.

Suggested Citation

  • Hansen, Henrik & Rand, John & Tarp, Finn, 2003. "Are FDI Inflows Complements or Substitutes Across Borders: Empirical Evidence from Five Asian Countries," MPRA Paper 72834, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:72834
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/72834/1/MPRA_paper_72834.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. Luiz R. de Mello Jr., 1997. "Foreign Direct Investment in Developing Countries: A Selective Survey," Studies in Economics 9701, School of Economics, University of Kent.
    3. de Mello, Luiz R, Jr, 1999. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 133-151, January.
    4. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    5. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
    6. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    7. 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.
    8. Soren Johansen, 2002. "A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model," Econometrica, Econometric Society, vol. 70(5), pages 1929-1961, September.
    9. 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.
    10. KH Zhang, 2001. "Does Foreign Direct Investment Promote Economic Growth? Evidence From East Asia And Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 175-185, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Foreign Direct Investment; Asia; Causality;

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:72834. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.