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On the Causal Links Between FDI and Growth in Developing Countries
Abstract
We analyse the Granger causal relationships between foreign direct investment (FDI) and GDP in a sample of 31 developing countries covering 31 years. Using estimators for heterogeneous panel data we find bi-directional causality between the FDI-to-GDP ratio and the level of GDP. FDI has a lasting impact on GDP, while GDP has no long-run impact on the FDI-to-GDP ratio. In that sense FDI causes growth. Furthermore, in a model for GDP and FDI as a fraction of gross capital formation (GCF) we also find long-run effects from FDI to GDP. This finding may be interpreted as evidence in favour of the hypotheses that FDI has an impact on GDP via knowledge transfers and adoption of new technology.
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Cites
STATISTICAL ANALYSIS OF COINTEGRATION VECTORS
Johansen, S. (1988) · Journal of Economic Dynamics and Control · doi:10.1016/0165-1889(88)90041-3 · Cited by 17,027
Statistical inference in vector autoregressions with possibly integrated processes
Toda, H. Y., & Yamamoto, T. (1995) · Journal of Econometrics · doi:10.1016/0304-4076(94)01616-8 · Cited by 6,108
Estimating long-run relationships from dynamic heterogeneous panels
Pesaran, M. H., & Smith, R. (1995) · Journal of Econometrics · doi:10.1016/0304-4076(94)01644-f · Cited by 5,479 · cited 3×
“The regression results in systems (1a)-(1b) in Table 3, and (3a)-(3b) in Table 2 are based on the mean group estimator proposed by Pesaran and Smith (1995).”
Cited by
Impact of Tourism on Economic Growth and Development in Africa
Fayissa, B., Nsiah, C., & Tadasse, B. (2008) · Tourism Economics · doi:10.5367/000000008786440229 · Cited by 393
Does Foreign Direct Investment Reduce Poverty in Africa and are There Regional Differences?
Gohou, G., & Soumaré, I. (2012) · World Development · doi:10.1016/j.worlddev.2011.05.014 · Cited by 308
Foreign direct investment and economic growth: A real relationship or wishful thinking?
Iamsiraroj, S., & Ulubaşoğlu, M. A. (2015) · Economic Modelling · doi:10.1016/j.econmod.2015.08.009 · Cited by 279
Udemba, E. N. (2020) · Science of The Total Environment · doi:10.1016/j.scitotenv.2020.139270 · Cited by 180
The Politics of Foreign Direct Investment in Authoritarian Regimes
Bastiaens, I. (2016) · International Interactions · doi:10.1080/03050629.2015.1065699 · Cited by 29
Metadata
- Authors
- Hansen, H., & Rand, J.
- Venue
- The World Economy
- Publisher
- Wiley
- Published
- 2006-01
- Volume
- 29
- Issue
- 1
- Pages
- 21-41
- ISSN
- 0378-5920 (ISSN-L)
- 1467-9701
- OpenAlex
- W2107602191
- Cited by
- 644
- References
- 3
- FWCI
- 58.02
- Type
- journal article
- Language
- en
- Open access
- closed
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