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Does Foreign Direct Investment Promote Growth? Panel Data and Time Series Evidence from Less Developed Countries, 1970-2002

Author

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  • Sarkar, Prabirjit

Abstract

The present study casts some doubt on the growth-promoting effect of foreign direct investment (FDI), which is widely supported by the proponents of financial globalization. The panel data analysis of 51 less developed countries shows a rising relationship between growth and FDI (relative to gross capital formation) only for the group of 11 relatively rich and open-economy countries. The time-series analysis observes meaningful positive relationships between FDI and growth only for 3 countries belonging to this group and some other countries. But by and large no long-term positive relationship exists between the two irrespective of income levels, openness and FDI-dependence.

Suggested Citation

  • Sarkar, Prabirjit, 2007. "Does Foreign Direct Investment Promote Growth? Panel Data and Time Series Evidence from Less Developed Countries, 1970-2002," MPRA Paper 5176, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5176
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    File URL: https://mpra.ub.uni-muenchen.de/5176/1/MPRA_paper_5176.pdf
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    Citations

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    Cited by:

    1. Emre Gökçeli & Jan Fidrmuc & Sugata Ghosh, 2022. "Effect of Foreign Direct Investment on Economic Growth and Domestic Investment: Evidence from OECD Countries," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 8(2), pages 190-216.
    2. Soylu Özgür Bayram, 2019. "Do foreign direct investment and savings promote economic growth in Poland?," Economics and Business Review, Sciendo, vol. 5(4), pages 3-22, December.
    3. Moheddine Younsi & Marwa Bechtini & Hasna Khemili, 2021. "The effects of foreign aid, foreign direct investment and domestic investment on economic growth in African countries: Nonlinearities and complementarities," African Development Review, African Development Bank, vol. 33(1), pages 55-66, March.
    4. Najeeb Muhammad Nasir & Mohammed Ziaur Rehman & Nasir Ali, 2017. "Foreign Direct Investment, Financial Development and Economic Growth," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(4), pages 228-239, October.
    5. Ghulam Mustafa, 2023. "The Dynamic Relationship Between Financial Development, Economic Growth, Foreign Direct Investment and Trade Openness: Evidence from South Asian Countries," Millennial Asia, , vol. 14(3), pages 406-433, September.
    6. Md. Noman Siddikee & Mohammad Mafizur Rahman, 2021. "Foreign Direct Investment, Financial Development, and Economic Growth Nexus in Bangladesh," The American Economist, Sage Publications, vol. 66(2), pages 265-280, October.
    7. Avisha Malik & Ash Narayan Sah, 2023. "Does FDI Impact the Economic Growth of BRICS Economies? Evidence from Bayesian VAR," JRFM, MDPI, vol. 17(1), pages 1-19, December.

    More about this item

    Keywords

    Foreign Direct Investment; Financial Globalization; Liberalization;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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