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Growth effects of FDI and portfolio investment flows to developing countries: a disaggregated analysis by income levels

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  • Glauco de Vita
  • Khine Kyaw

Abstract

What is the impact of foreign direct investment (FDI) and portfolio investment flows on the economic growth of low-, lower middle- and upper middle-income countries? In this article we address this question using a dynamic panel model and a large data set of 126 developing countries for the period 1985 to 2002. Employing the system-generalized methods of moments (GMM) estimation approach, our findings suggest that only developing countries that have reached a minimum level of economic development and absorptive capacity are capturing the growth-enhancing effects of both forms of investment inflows.

Suggested Citation

  • Glauco de Vita & Khine Kyaw, 2009. "Growth effects of FDI and portfolio investment flows to developing countries: a disaggregated analysis by income levels," Applied Economics Letters, Taylor & Francis Journals, vol. 16(3), pages 277-283.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:3:p:277-283
    DOI: 10.1080/13504850601018437
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    References listed on IDEAS

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    1. Nunnenkamp, Peter & Spatz, Julius, 2003. "Foreign direct investment and economic growth in developing countries: how relevant are host-country and industry characteristics?," Kiel Working Papers 1176, Kiel Institute for the World Economy (IfW Kiel).
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    3. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    4. Robert E. Lipsey & Robert C. Feenstra & Carl H. Hahn & George N. Hatsopoulos, 1999. "The Role of Foreign Direct Investment in International Capital Flows," NBER Chapters, in: International Capital Flows, pages 307-362, National Bureau of Economic Research, Inc.
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