Absorptive Capacity and the Effects of Foreign Direct Investment and Equity Foreign Portfolio Investment on Economic Growth

Posted: 19 Jun 2019

Date Written: 2004

Abstract

This study examines the effects of foreign direct investment (FDI) and equity foreign portfolio investment (EFPI) on economic growth using data on 80 countries from 1979 through 1998. The results largely suggest that lagged FDI and EFPI do not have direct, unmitigated positive effects on growth, but some data are consistent with the view that the effects of FDI and EFPI are contingent on the ‘absorptive capacity’ of host countries, with particular respect to financial or institutional development. Moreover, extreme bound analysis (EBA) of significant results indicates that the estimates are robust compared to other empirical studies on growth.

Keywords: foreign direct investment, equity foreign portfolio, investment, economic growth, financial development

JEL Classification: F3, F4, O1

Suggested Citation

Durham, J. Benson, Absorptive Capacity and the Effects of Foreign Direct Investment and Equity Foreign Portfolio Investment on Economic Growth (2004). European Economic Review, Vol. 48, No. 2, 2004. Available at SSRN: https://ssrn.com/abstract=3402617

J. Benson Durham (Contact Author)

affiliation not provided to SSRN

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
90
PlumX Metrics