Liberalization, FDI, and Growth in Developing Countries: A Panel Cointegration Approach

Basu, Parantap; Chakraborty, Chandana; Reagle, Derrick P.

doi:10.1093/ei/cbg024

Cited by 214 publications

(145 citation statements)

References 15 publications

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“…Where the host nations implement import substitution policies these studies find a positive but weak impact to the economy. Similar results were found by Basu et al (2003) as well as Trevino and Upadhyaya (2003) who indicate that trade openness as being an important factor that leads to FDI-induced economic growth. Borensztein et al (1998) as well as Jyun-Yi, Wu, and Hsu Chin-Chiang (2008) find that FDI has a positive impact however its size depends on the quality of the human capital in the host country.…”

Section: The Fdi Economic Growth Literature Reviewsupporting

confidence: 86%

Reforming the IMF to Increase FDI Led Economic Growth: The Case of Latin American and Caribbean Countries

Mahate¹

2018

Management and Economics Research Journal

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There is a strong body of literature that finds a direct connection between inward foreign direct investment and economic growth in the host country. At the same time, economic growth in the host country attracts additional Foreign Direct Investment (FDI). This bidirectional relationship can be supported by the IMF through its lending program to countries to assist in dealing with short-term shocks as well as managing more long-term structural issues. In fact, the IMF programs in theory should provide an indicator to potential investors that the country is committed to making a change and opening its economy, which are typical requirements under IMF conditions. IMF intervention should lead to a positive impact on inward FDI. This study examines the impact of IMF-support programs on inward FDI for a sample of Latin American and Caribbean Countries. The results from this study reveal that being on an IMF borrowing program has a negative impact on inward FDI in the second and third year. We argue that being on an IMF borrowing program does not provide inward FDI with the seal of approval that it requires in making an investment.

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Section: The Fdi Economic Growth Literature Reviewsupporting

confidence: 86%

Reforming the IMF to Increase FDI Led Economic Growth: The Case of Latin American and Caribbean Countries

Mahate¹

2018

Management and Economics Research Journal

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“…These two directions do not exclude each other. In this line of thinking, Basu et al [12] found bidirectional causal links between FDI and economic growth in 23 developing countries.…”

Section: Literature Reviewmentioning

confidence: 98%

Economic Growth, Foreign Direct Investment and CO2 Emissions in China: A Panel Granger Causality Analysis

Peng

Tan

et al. 2016

Sustainability

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Using a sample of province-level panel data, this paper investigates the Granger causality associations among economic growth (GDP), foreign direct investment (FDI) and CO 2 emissions in China. By applying the bootstrap Granger panel causality approach (Kónya, 2006), we consider both cross-sectional dependence and homogeneity of different regions in China. The empirical results support that the causality direction not only works in a single direction either from GDP to FDI (in Yunnan) or from FDI to GDP (in Beijing, Neimenggu, Jilin, Shanxi and Gansu), but it also works in both directions (in Henan). Moreover, we document that GDP is Granger-causing CO 2 emissions in Neimenggu, Hubei, Guangxi and Gansu while there is bidirectional causality between these two variables in Shanxi. In the end, we identify the unidirectional causality from FDI to CO 2 emissions in Beijing, Henan, Guizhou and Shanxi, and the bidirectional causality between FDI and CO 2 emissions in Neimenggu.

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“…Balasubramanyam Salisu et al (1996) analyzed data for 46 developing countries ,and detected the growth effect of FDI is positive for countries that pursue all outwardly oriented trade policy and potentially negative for countries adopting an inwardly oriented policy. Using the panel cointegration framework, Basu Chakraborty et al (2003) analyzed data for 23 developing countries from 1978 to 1996, and discovered that there is evidence of bi-directional causality between GDP and FDI for more open economies both in the short-run and in the long-run, while the long run causality is unidirectional and runs from GDP to FDI for relatively closed economies. Using data from 1969 to 2000 and the Toda and Yamamoto (1995) specification, Chowdhury and Mavrotas (2006) discovered that it is GDP that causes FDI in the case of Chile and not vice versa, while for both Malaysia and Thailand, there is a strong evidence of bi-directional causality between the two variables.…”

Section: The Empirical Studiesmentioning

confidence: 99%

“…In order to recognize the existence of a cointegrating relationship among the variables, Pedroni (1999Pedroni ( , 2004) examines statistical significance of in the equation (11).…”

Section: Panel Cointegration Testsmentioning

confidence: 99%

Dynamic Causal Relationships among GDP, Exports, and Foreign Direct Investment (FDI) in the Developing Countries

Mehrara

Haghnejad

Dehnavi

et al. 2013

ILSHS

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Using panel techniques, this paper estimates the causality among economic growth, exports, and Foreign Direct Investment (FDI) inflows for developing countries over the period of 1980 to 2008. The study indicates that; firstly, there is strong evidence of bidirectional causality between economic growth and FDI inflows. Secondly, the exports-led growth hypothesis is supported by the finding of unidirectional causality running from exports to economic growth in both the short-run and the long-run. Thirdly, export is not Granger caused by economic growth and FDI inflow in either the short run or the long run. On the basis of the obtained results, it is recommended that outwardoriented strategies and policies of attracting FDI be pursued by developing countries to achieve higher rates of economic growth. On the other hand, the countries can increase FDI inflows by stimulating their economic growth.

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Liberalization, FDI, and Growth in Developing Countries: A Panel Cointegration Approach

Cited by 214 publications

References 15 publications

Reforming the IMF to Increase FDI Led Economic Growth: The Case of Latin American and Caribbean Countries

Reforming the IMF to Increase FDI Led Economic Growth: The Case of Latin American and Caribbean Countries

Economic Growth, Foreign Direct Investment and CO2 Emissions in China: A Panel Granger Causality Analysis

Dynamic Causal Relationships among GDP, Exports, and Foreign Direct Investment (FDI) in the Developing Countries

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