Foreign direct investment and economic growth: A real relationship or wishful thinking?

Iamsiraroj, Sasi and Ulubaşoğlu, Mehmet Ali 2015, Foreign direct investment and economic growth: A real relationship or wishful thinking?, Economic modelling, vol. 51, pp. 200-213, doi: 10.1016/j.econmod.2015.08.009.

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Title Foreign direct investment and economic growth: A real relationship or wishful thinking?
Author(s) Iamsiraroj, Sasi
Ulubaşoğlu, Mehmet AliORCID iD for Ulubaşoğlu, Mehmet Ali
Journal name Economic modelling
Volume number 51
Start page 200
End page 213
Total pages 14
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-12-01
ISSN 0264-9993
Keyword(s) Absorptive capacity
Economic growth
Summary Several theories have been advanced on the beneficial effect of foreign direct investment (FDI) on economic growth. However, mixed empirical findings have resulted in a long-standing debate. This study explores the global FDI-growth relationship through an 'informed' econometric analysis predicated on substantial guidance obtained from a detailed investigation of 880 estimates reported in 108 published studies. With model uncertainties alleviated and the core specification benchmarked against the aforementioned assessment, our econometric analysis, utilising a global sample of 140 countries in the period 1970 to 2009, conclusively documents that FDI positively affects economic growth. Moreover, we find that this association holds globally as strongly as in the developing world. Further, it is regional variation rather than within-country variation, and contemporaneous FDI rather than past FDI, which matters for growth. Finally, appropriate absorptive capacity indicators for positive growth are identified to be trade openness and financial development rather than schooling.
Language eng
DOI 10.1016/j.econmod.2015.08.009
Field of Research 140202 Economic Development and Growth
Socio Economic Objective 910103 Economic Growth
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Elsevier
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Document type: Journal Article
Collections: Faculty of Business and Law
Department of Economics
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