Does OFDI Affect Economic Growth? Evidence from Cross-Country Regression and Time Series Analysis

25 Pages Posted: 4 Jun 2015 Last revised: 4 Aug 2016

See all articles by Fayyaz Ahmad

Fayyaz Ahmad

Lanzhou University

Muhammad Umar Draz

Universiti Teknologi PETRONAS

Su-chang Yang

Lanzhou University

Date Written: May 28, 2015

Abstract

The purpose of this study is to examine the impact of Outward Foreign Direct Investment (OFDI) on economic growth. Two econometric approaches are applied: cross-country regression for the sample of the selected ASEAN countries and a time series approach for China. Both approaches suggest that OFDI has a negative impact on economic growth. Several specifications and estimations techniques confirm that our findings are robust. In addition, the Granger causality test indicates unilateral causality from OFDI to GDP. Thus, the result specifies that increasing investment abroad decrease domestic growth. Most of the previous studies primarily focused on production, employment and exports in relation with outward investment on a firm level. This paper, in contrast, focuses on the aggregate impact of outward investment on economic growth of selected ASEAN countries. This analysis covers a period of more than three decades.

Keywords: ASEAN, China, Economic Growth, OFDI

JEL Classification: F21, F43, O47, O53, O57

Suggested Citation

Ahmad, Fayyaz and Draz, Muhammad Umar and Yang, Su-chang, Does OFDI Affect Economic Growth? Evidence from Cross-Country Regression and Time Series Analysis (May 28, 2015). Available at SSRN: https://ssrn.com/abstract=2613840 or http://dx.doi.org/10.2139/ssrn.2613840

Fayyaz Ahmad

Lanzhou University ( email )

199 Donggang West Road
Lanzhou City, Gansu Province 730000
China

Muhammad Umar Draz (Contact Author)

Universiti Teknologi PETRONAS ( email )

Department of Management and Humanities
Seri Iskandar, Perak 32610
Malaysia

Su-chang Yang

Lanzhou University ( email )

Lanzhou University
199 Donggang West Road
Lanzhou, Gansu 730000
China

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