The Relationship between Foreign Direct Investment and Economic Growth: Evidence from Transitional Countries
19 Pages Posted: 1 Jun 2007
Date Written: October 2006
This paper examines the importance of Foreign Direct Investment (FDI) on economic growth. Using a panel data set for 27 transition economies over the period 1991-2004 as well as the methodology of panel cointegration and causality tests, the empirical findings show that FDI does exhibit a significant relationship with economic growth, at least, for those transition countries that are characterized by high levels of income and have implemented successful privatization programs.
Keywords: Foreign Direct Investment (FDI), economic growth, transition economies, panel cointegration, panel causality
JEL Classification: F23, P2, F21, O16, C33, P27
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