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FDI and Economic Growth: A Changing Relationship Across Country and Overtime

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  • Hayat, Arshad
  • Cahlik, Tomas

Abstract

In this paper, we use a threshold regression model to estimate a threshold level of natural resource abundance and split the sample of 70 countries into groups of low-natural resource and high-natural resource groups. We found evidence that FDI has a positive impact on economic growth of the host country if the host country’s natural resource sector is below the threshold. However, FDI inflow doesn’t have any significant impact on growth in countries with natural resource sector larger than the threshold. In the end, we apply a Markov regime switching model (MSM) to a time series data from Pakistan and found that Pakistan’s economy experienced 2 states. While in the state 1 the economy didn’t experience any FDI induced economic growth, it did receive a strong FDI induced economic growth in state 2.

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  • Hayat, Arshad & Cahlik, Tomas, 2017. "FDI and Economic Growth: A Changing Relationship Across Country and Overtime," MPRA Paper 78240, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:78240
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    References listed on IDEAS

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    Cited by:

    1. Hayat, Arshad & Rakshit, Shoumyadeep, 2020. "Natural resources curse or blessing? Evidence from a large panel dataset," MPRA Paper 101704, University Library of Munich, Germany.

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    More about this item

    Keywords

    FDI; Economic Growth; Natural Resources; Threshold Model; Markov Switching Model;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • P45 - Economic Systems - - Other Economic Systems - - - International Linkages

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