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FDI and Economic Growth: The Role of Natural Resources

Hayat, Arshad (2014): FDI and Economic Growth: The Role of Natural Resources.

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Abstract

This paper focuses on the relationship between FD inflows, natural resource abundance and economic growth. For a large dataset of 104 countries for the period 1996-2015, the paper applies Arellano and Bond GMM estimation to investigate natural resource curse, the impact of FDI inflow on economic growth growth and more finally the role of natural resource sector on the FDI-growth relationship. The paper found a positive and significant affect of FDI inflows on economic growth of the host country. However, the impact of FDI inflows on economic growth changes with the changes in the size of natural resource sector. The estimated positive impact of FDI inflows on economic growth declines with the expansion in the size of natural resources. Beyond a certain limit, a further expansion in the size of natural resource sector will lead to a negative effect of FDI on economic growth.

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