Foreign Direct Investment, Institutional Framework and Economic Growth

Hayat, Arshad (2016): Foreign Direct Investment, Institutional Framework and Economic Growth.

Abstract

The paper explores the role of institutional quality on economic growth and more specifically the role it plays through foreign direct investment. The paper uses an economic performance relevant indicators of institutional quality (both in aggregate and individual indicators) to evaluate its direct impact on economic growth and an indirect impact on economic growth via foreign direct investment. The paper applied instrumental variable model to a larger dataset of 106 countries and found that besides a strong direct positive effect on economic growth the aggregate institutional quality variable as well as all individual variables except for the rule of law have a small but significant indirect impact on economic that takes place through boosting foreign direct investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreign Direct Investment, Institutional Quality, Economic Growth, Instrumental Variable
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E14 - Austrian ; Evolutionary ; Institutional; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

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