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

Sarkar, Prabirjit (2007): Does Foreign Direct Investment Promote Growth? Panel Data and Time Series Evidence from Less Developed Countries, 1970-2002.

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.

• Item Type: MPRA Paper
• Institution: Jadavpur University
• Language: English
• Keywords: Foreign Direct Investment; Financial Globalization; Liberalization
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F50 - General; F - International Economics > F0 - General > F02 - International Economic Order and Integration; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O50 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance