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Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis

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  • Sumei Tang
  • Antony Selvanathan
  • Saroja Selvanathan

Abstract

In this paper, we investigate the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003. Towards this purpose, a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques are used. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth.

Suggested Citation

  • Sumei Tang & Antony Selvanathan & Saroja Selvanathan, 2008. "Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis," WIDER Working Paper Series RP2008-19, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2008-19
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    Keywords

    Economic development; Investments; Foreign investments;
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