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Does foreign direct investment lead or lag economic growth ? evidence from Russia

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  • Saparova, Nurzhamal
  • Masih, Mansur

Abstract

It is generally believed by many economists that particularly in the developing countries, foreign direct investment (FDI) plays a very important role. The FDI is even considered as the engine of economic growth and development. However, various empirical studies show contradictory results where the impact of FDI on economic growth is not definitive. In this paper we attempt to examine whether a long-run theoretical relationship does indeed exist between the foreign direct investment and economic growth and whether FDI has any significant causal impact on driving economic growth. The standard time series techniques are used to address our research objectives. Russia is used as a case study. Our results tend to indicate that there is a long-run theoretical relationship between the FDI inflow and economic growth as evidenced by cointegration test. However, based on the generalized variance decomposition test, the FDI does not lead but lag economic growth at least in the context of Russia.

Suggested Citation

  • Saparova, Nurzhamal & Masih, Mansur, 2018. "Does foreign direct investment lead or lag economic growth ? evidence from Russia," MPRA Paper 111252, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111252
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    File URL: https://mpra.ub.uni-muenchen.de/111252/1/MPRA_paper_111252.pdf
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Theodore H. Moran, 1998. "Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 53, April.
    3. repec:zbw:bofitp:2006_017 is not listed on IDEAS
    4. 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..
    5. Mansur Masih & Ali Al-Elg & Haider Madani, 2009. "Causality between financial development and economic growth: an application of vector error correction and variance decomposition methods to Saudi Arabia," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1691-1699.
    6. Edward M. Graham & Erika Wada, 2001. "Foreign Direct Investment in China: Effects on Growth and Economic Performance," Working Paper Series WP01-3, Peterson Institute for International Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    FDI; economic growth; lead-lag; VECM; VDC; Russia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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