The Impact of Foreign Direct Investment on Economic Growth
Emara, Noha, Coskunb, Orhan, and Soomroc, Faraz (2014). The Impact of Foreign Direct Investment on Economic Growth, with Orhan Coskun and Faraz Soomro, International Interdisciplinary Business-Economics Advancement Conference, Annual Meeting, July 16–19, 2014, Published Proceedings, 344–348, Istanbu
Posted: 24 May 2021
Date Written: 2014
Abstract
The study examines the impact of foreign direct investment on economic growth in selected countries. The inflows of FDI to host countries raise the question of how these inflows affect their economies and the interaction between FDI and growth. This study tests the effect of FDI on the economic growth of the host country based on the cross-country panel regression framework over the span of 10 years for 30 countries. The results show that the effect of FDI on economic growth in emerging market economies is greater than the developed market economies. But, in emerging market economies the coefficient on FDI is higher but less significant than the developed economies. Furthermore, the effect of FDI on economic growth, given eleven control variables in the model, show that the coefficient on FDI is positive and subsuming to the result that one percent increase in FDI will have approximate increase of 0.12% of economic growth in developing economies and 0.1% in developed economies. Our results are in line with priori-assumptions that the effect of FDI in emerging markets is higher than developed economies given the higher marginal returns to capital plus other positive spillover effects such as technology transfer, skill transfer and knowledge transfer.
Keywords: Foreign Direct Investment, Economic Growth, Emerging market Economies
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