Foreign Direct Investment, GDP Growth and Trade Liberalization: Evidence from Pioneering ASEAN Members

Journal of Economic Cooperation and Development, 38, 1 (2017), 97-126

29 Pages Posted: 19 Jun 2017

See all articles by Rajah Rasiah

Rajah Rasiah

University of Malaya

James Paul Asirvatham

University of Malaya (UM) - Faculty of Economics & Administration (FEA)

Ibrahim Adamu

University of Malaya (UM) - Faculty of Economics & Administration (FEA)

Date Written: April 18, 2016

Abstract

This paper revisits the argument on the contentious causality relationship between net FDI inflows and GDP among the pioneering Association of Southeast Asian Nations (ASEAN-5) members using data from 1970 till 2013. Although two-way correlations exist between these two variables in these countries, a careful analysis of these relationships using the fully modified ordinary least squares (FMOLS) regressions and the Vector Error Correction (VEC) model shows that causality exists only with on Thailand but the relationship is negative. The evidence from Thailand shows that GDP growth drives FDI outflows more than attracting FDI inflows. The results of all other members were not significant.

Keywords: foreign direct investment, GDP, trade, tariff deregulation, ASEAN

JEL Classification: F14, F15, F21, F63

Suggested Citation

Rasiah, Rajah and Asirvatham, James Paul and Adamu, Ibrahim, Foreign Direct Investment, GDP Growth and Trade Liberalization: Evidence from Pioneering ASEAN Members (April 18, 2016). Journal of Economic Cooperation and Development, 38, 1 (2017), 97-126, Available at SSRN: https://ssrn.com/abstract=2988492

Rajah Rasiah

University of Malaya ( email )

University of Malaya
Faculty of Economics and Administration
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia
60379673606 (Phone)
60379673719 (Fax)

James Paul Asirvatham

University of Malaya (UM) - Faculty of Economics & Administration (FEA) ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Ibrahim Adamu (Contact Author)

University of Malaya (UM) - Faculty of Economics & Administration (FEA) ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia
+60166862040 (Phone)

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