IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-20-00538.html
   My bibliography  Save this article

Foreign Direct Investment Inflows and Economic Growth in Singapore: an Empirical approach

Author

Listed:
  • Ha-chi Le

    (Nanyang Technological University, Singapore)

  • Thai-ha Le

    (Fulbright School of Public Policy and Management, Fulbright University, Vietnam)

Abstract

The aim of this paper is to examine the impacts of inward foreign direct investment (FDI) on economic growth in Singapore. The dataset during the period 1970-2018 was analyzed based on an extended Cobb-Douglas production function. Autoregressive distributed lag (ARDL) models, with accounting for a structural break, were utilized to assess the linkages among the variables. Two proxies for trade openness and two measures of financial developments were employed for comparison. The results show that, while there are multiple drivers of the country's economic growth in the short run, only FDI and exports are long-term determinants of Singapore's economic growth. The findings suggest that FDI plays a crucial role in assisting the country's economic development and the results are relatively robust to different measures of trade and finance. This implies that Singapore's “economic miracle†is indeed attributable to effective strategies in managing inward FDI and promoting trade activities and that more emphasis should be put on FDI in assisting national economic development.

Suggested Citation

  • Ha-chi Le & Thai-ha Le, 2020. "Foreign Direct Investment Inflows and Economic Growth in Singapore: an Empirical approach," Economics Bulletin, AccessEcon, vol. 40(4), pages 3256-3273.
    • Handle: RePEc:ebl:ecbull:eb-20-00538
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I4-P285.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Nazif Durmaz, 2017. "Foreign direct investments, democracy, and economic growth in Turkey," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 44(2), pages 232-252, February.
    3. 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.
    4. José Gregorio, 2005. "The Role of Foreign Direct Investment and Natural Resources in Economic Development," International Economic Association Series, in: Edward M. Graham (ed.), Multinationals and Foreign Investment in Economic Development, chapter 9, pages 179-197, Palgrave Macmillan.
    5. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    6. Brian J. Aitken & Ann E. Harrison, 2022. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 6, pages 139-152, World Scientific Publishing Co. Pte. Ltd..
    7. Blomström, Magnus & Kokko, Ari, 2003. "Human Capital and Inward FDI," EIJS Working Paper Series 167, Stockholm School of Economics, The European Institute of Japanese Studies.
    8. Tam Vu & Byron Gangnes & Ilan Noy, 2008. "Is foreign direct investment good for growth? Evidence from sectoral analysis of China and Vietnam," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 13(4), pages 542-562.
    9. Thai-Ha Le, 2016. "Dynamics between energy, output, openness and financial development in sub-Saharan African countries," Applied Economics, Taylor & Francis Journals, vol. 48(10), pages 914-933, February.
    10. Akinlo, A. Enisan, 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 627-639, July.
    11. Weijun Wu & Ling Yuan & Xiaoming Wang & Xiaping Cao & Sili Zhou, 2020. "Does FDI Drive Economic Growth? Evidence from City Data in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(11), pages 2594-2607, September.
    12. Richard Baldwin & Henrik Braconier & Rikard Forslid, 2005. "Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 945-963, November.
    13. Zhang, Kevin Honglin & Song, Shunfeng, 2001. "Promoting exports: the role of inward FDI in China," China Economic Review, Elsevier, vol. 11(4), pages 385-396.
    14. Thai-Ha Le & Jungsuk Kim & Minsoo Lee, 2016. "Institutional Quality, Trade Openness, and Financial Sector Development in Asia: An Empirical Investigation," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(5), pages 1047-1059, May.
    15. Huay Lee & Hui Tan, 2006. "Technology Transfer, FDI and Economic Growth in the ASEAN Region," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 11(4), pages 394-410.
    16. Soltani Hassen & Ochi Anis, 2012. "Foreign Direct Investment (FDI) and Economic Growth: an approach in terms of cointegration for the case of Tunisia," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(4), pages 1-13.
    17. Xu, Bin, 2000. "Trade, FDI, and International Technology Diffusion," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 585-601.
    18. 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.
    19. Ritu Rana & Manoj Sharma, 2020. "Dynamic Causality Among FDI, Economic Growth and CO2 Emissions in India With Open Markets and Technology Gap," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 11(3), pages 15-31, July.
    20. Azman-Saini, W.N.W. & Baharumshah, Ahmad Zubaidi & Law, Siong Hook, 2010. "Foreign direct investment, economic freedom and economic growth: International evidence," Economic Modelling, Elsevier, vol. 27(5), pages 1079-1089, September.
    21. Azam, Muhammad & Khan, Abdul Qayyum & Bakhtyar, B. & Emirullah, Chandra, 2015. "The causal relationship between energy consumption and economic growth in the ASEAN-5 countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 732-745.
    22. Leandro do Rosario Viana Duarte & Yin Kedong & Li Xuemei, 2017. "The Relationship between FDI, Economic Growth and Financial Development in Cabo Verde," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(5), pages 132-142, May.
    23. Le, Thai-Ha & Nguyen, Canh Phuc, 2019. "Is energy security a driver for economic growth? Evidence from a global sample," Energy Policy, Elsevier, vol. 129(C), pages 436-451.
    24. Niels Hermes & Robert Lensink, 2003. "Foreign direct investment, financial development and economic growth," Journal of Development Studies, Taylor & Francis Journals, vol. 40(1), pages 142-163.
    25. Philipp Eudelle & Ashin Shrestha, 2017. "Foreign Direct Investment and Economic Growth: The Cases of Singapore and Oman," Global Policy, London School of Economics and Political Science, vol. 8(3), pages 396-399, September.
    26. Zhang, Kevin Honglin, 1999. "Foreign Direct Investment and Economic Growth: Evidence from Ten East Asian Economies," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 52(4), pages 517-535.
    27. 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.
    28. Mete Feridun & Yaya Sissoko, 2011. "Impact of FDI on Economic Development: A Causality Analysis for Singapore, 1976 – 2002," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 4(1), pages 7-17, March.
    29. 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.
    30. Pegkas, Panagiotis, 2015. "The impact of FDI on economic growth in Eurozone countries," The Journal of Economic Asymmetries, Elsevier, vol. 12(2), pages 124-132.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
    2. Kottaridi, Constantina & Stengos, Thanasis, 2010. "Foreign direct investment, human capital and non-linearities in economic growth," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 858-871, September.
    3. Rudra P. Pradhan, Mak B. Arvin, & Mahendhiran Nair, Jay Mittal, & Neville R. Norman, 2017. "Telecommunications infrastructure and usage and the FDI–growth nexus: evidence from Asian-21 countries "Abstract: This paper examines causal relationships between telecommunications infrastructur," Department of Economics - Working Papers Series 2032, The University of Melbourne.
    4. Sam Hobbs & Dimitrios Paparas & Mostafa E. AboElsoud, 2021. "Does Foreign Direct Investment and Trade Promote Economic Growth? Evidence from Albania," Economies, MDPI, vol. 9(1), pages 1-19, January.
    5. Seng Sothan, 2017. "Causality between foreign direct investment and economic growth for Cambodia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1277860-127, January.
    6. Chu, Amanda M.Y. & Lv, Zhihui & Wagner, Niklas F. & Wong, Wing-Keung, 2020. "Linear and nonlinear growth determinants: The case of Mongolia and its connection to China," Emerging Markets Review, Elsevier, vol. 43(C).
    7. Ausloos, Marcel & Eskandary, Ali & Kaur, Parmjit & Dhesi, Gurjeet, 2019. "Evidence for Gross Domestic Product growth time delay dependence over Foreign Direct Investment. A time-lag dependent correlation study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 527(C).
    8. Olajide Oladipo, 2013. "Does foreign direct investment cause long run economic growth? Evidence from the Latin American and the Caribbean countries," International Economics and Economic Policy, Springer, vol. 10(4), pages 569-582, December.
    9. Narula, Rajneesh & Portelli, Brian, 2004. "Foreign direct investment and economic development: Opportunities and limitations from a developing country perspective," Research Memorandum 009, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    10. Gunby, Philip & Jin, Yinghua & Robert Reed, W., 2017. "Did FDI Really Cause Chinese Economic Growth? A Meta-Analysis," World Development, Elsevier, vol. 90(C), pages 242-255.
    11. Shima'a Hanafy & Marcus Marktanner, 2015. "Sectoral FDI, Absorptive Capacity and Economic Growth — Empirical Evidence from Egyptian Governorates," MAGKS Papers on Economics 201537, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    12. Mohammad I. Elian & Nabeel Sawalha & Ahmed Bani-Mustafa, 2020. "Revisiting the FDI–Growth Nexus: ARDL Bound Test for BRICS Standalone Economies," Modern Applied Science, Canadian Center of Science and Education, vol. 14(6), pages 1-1, June.
    13. E. M. Ekanayake & John R. Ledgerwood, 2010. "How Does Foreign Direct Investment Affect Growth In Developing Countries? An Empirical Investigation," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(3), pages 43-53.
    14. Faik Bilgili & Nadide S. Tülüce & Ibrahim Doğan & H. Hilal Bağlıtas, 2016. "The causality between FDI and sector-specific production in Turkey: evidence from threshold cointegration with regime shifts," Applied Economics, Taylor & Francis Journals, vol. 48(5), pages 345-360, January.
    15. Chee-Keong Choong, 2012. "Does domestic financial development enhance the linkages between foreign direct investment and economic growth?," Empirical Economics, Springer, vol. 42(3), pages 819-834, June.
    16. Biswajit Maitra, 2021. "Relative role of external debt, FDI, and domestic investment in economic growth: evidence from Sri Lanka," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 329-347, September.
    17. Akisik, Orhan & Gal, Graham & Mangaliso, Mzamo P., 2020. "IFRS, FDI, economic growth and human development: The experience of Anglophone and Francophone African countries," Emerging Markets Review, Elsevier, vol. 45(C).
    18. Bouchoucha, Najeh & Ali, Walid, 2019. "The impact of FDI on economic growth in Tunisia: An estimate by the ARDL approach," MPRA Paper 91465, University Library of Munich, Germany.
    19. Rosemary Stanley Taylor, 2020. "Foreign direct investment and economic growth. Analysis of sectoral foreign direct investment in Tanzania," African Development Review, African Development Bank, vol. 32(4), pages 699-717, December.
    20. Ketteni, Elena & Kottaridi, Constantina, 2019. "The impact of regulations on the FDI-growth nexus within the institution-based view: A nonlinear specification with varying coefficients," International Business Review, Elsevier, vol. 28(3), pages 415-427.

    More about this item

    Keywords

    FDI; Economic growth; Singapore; ARDL Cointegration.;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F1 - International Economics - - Trade

    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:ebl:ecbull:eb-20-00538. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.