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The Effect Of Foreign Direct Investment On Economic Growth: The Institutional Threshold

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  • Ines TROJETTE

    (LEAD, University of Toulon)

Abstract

This paper examines whether the effect of foreign direct investment on economic growth is dependent upon the institutional level for five regions (SSA, MENA, Europe, Asia and America). Using GMM system covering the period from 1984-2013, our results highlight the role of institutional develop-ment in moderating the ambiguous impacts of FDI on GDP growth. Under the threshold regression, technique developed by Caner and Hansen (2004) we find that the index of institutions matter for all groups except for the America group. The fact of taking the components of institutions reveal that above the threshold of government stability and the respect of law and order FDI enhances GDP growth.

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  • Ines TROJETTE, 2016. "The Effect Of Foreign Direct Investment On Economic Growth: The Institutional Threshold," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 43, pages 111-138.
    • Handle: RePEc:tou:journl:v:43:y:2016:p:111-138
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    More about this item

    Keywords

    FOREIGN DIRECT INVESTMENT; GROWTH; INSTITUTIONAL DEVELOPMENT; THRESHOLD EFFECT;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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