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Foreign Direct Investment Response to Economic Growth Shocks: Evidence from a VAR Estimation on a Panel Dataset

Author

Listed:
  • Tuyen Quang Tran

    (Vietnam National University, Hanoi, Vietnam)

  • Van Ha

    (School of Business and Management, RMIT International University, Vietnam)

  • Tinh Doan

    (Vietnam National University, Hanoi, Vietnam)

Abstract

This paper examines the relationship between inward foreign direct investment (IFDI) and economic growth in OECD and ASEAN, China and Hong Kong (East Asia) over the past 35 years (1985-2019). Our estimates using vector autoregression on a panel dataset show that the mutually causal relationship between IFDI inflows and economic growth exists in both the advanced and emerging countries. However, the relationship appears to be stronger in the OECD economies than in the East Asian economies, and IFDI is more responsive to economic growth in the OECD countries. The results from impulse response functions also indicate that a shock in economic growth leads to a change in the IFDI inflows into OECD countries while there is no strong evidence in ASEAN, China and Hong Kong.

Suggested Citation

  • Tuyen Quang Tran & Van Ha & Tinh Doan, 2024. "Foreign Direct Investment Response to Economic Growth Shocks: Evidence from a VAR Estimation on a Panel Dataset," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 18-31, March.
    • Handle: RePEc:nwe:eajour:y:2024:i:1:p:18-31
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    More about this item

    Keywords

    foreign direct investment; economic growth; PVAR; impulse response functions OECD; East Asia;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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