Revisiting FDI-led growth hypothesis: the role of sector characteristics

Gönel, Feride; Aksoy, Tolga

doi:10.1080/09638199.2016.1195431

Cited by 25 publications

(39 citation statements)

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“…Empirical studies, such as Vu Le and Suruga (2005a, b), Durham (2004), Borensztein et al (1998), and Balasubramanyam et al (1996), have investigated the FDI-growth nexus. They have stressed that the possibility of a positive impact of FDI on economic growth depends on such mechanisms as the technology-upgrading progress, human capital investment, absorptive capacity, and trade policy adopted by the host country (Gönel and Aksoy 2016;Katircioglu 2009;Silajdzic and Mehic 2016). These studies generally considered a panel of countries, suggesting that FDI can have a positive but indirect effect on economic growth.…”

Section: Introductionmentioning

confidence: 99%

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Sarker

Khan

2020

Financ Innov

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The relationship between foreign direct investment (FDI) inflows and economic growth in host countries is a heavily debated issue. Although some studies have found evidence of the positive impact of FDI on economic growth, others have revealed the opposite result. Studies that examined the causality between FDI and gross domestic product (GDP) also have found evidence of unidirectional causality and, in some cases, a bidirectional causality. This study investigated the causal nexus between FDI and GDP in Bangladesh by employing standard time-series econometric tools, namely, augmented Dickey-Fuller, augmented Dickey-Fuller generalized least square, Kwiatkowski-Phillips-Schmidt-Shin, and Lee-Strazicich unit root tests to check stationarity, augmented autoregressive distributed lag (augmented ARDL) bounds testing approach to check cointegration, and Granger causality to explore the direction of causality. The augmented ARDL model found a long-run relationship between FDI and GDP. In addition, the error correction model and Granger causality results indicated the presence of a unidirectional causality running from GDP to FDI.

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Section: Introductionmentioning

confidence: 99%

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Sarker

Khan

2020

Financ Innov

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“…Yet, growth impacts of FDI remain inconclusive, being more evident in growth theory than in the many empirical studies (Iamsiraroj and Ulubasoglu, 2015). Although findings on direct effects of FDI on economic growth are mixed, the importance of the absorptive capacity of recipient countries is regularly highlighted (e.g., Borensztein et al, 1998;de Mello, 1999;Alfaro et al, 2004;Makki and Somwaru, 2004;Gönel and Aksoy, 2016).…”

Section: Introductionmentioning

confidence: 99%

“…The idea that different sectors vary in their potential to absorb foreign technology and create linkages with the rest of the economy was early discussed in the seminal work by Hirschman (1958). However, as stated by Gönel and Aksoy (2016), the literature still largely neglects the sectoral dimension of FDI when studying the effect of FDI on economic growth. Moreover, studies that investigate possible channels of absorptive capacity, while distinguishing between the FDI recipient sectors, are scarce, especially in the case of developing countries.…”

Section: Introductionmentioning

confidence: 99%

“…The crosssectional analysis by Alfaro (2003) investigates only human capital as a channel of absorptive capacity. Restricted to OECD countries only, Gönel and Aksoy (2016) additionally investigate financial and technological development as channels of absorptive capacity of sectoral FDI with a strong focus on Information and Communication Technology (ICT).…”

Section: Introductionmentioning

confidence: 99%

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Sectoral FDI, absorptive capacity and economic growth – empirical evidence from Egyptian governorates

Hanafy

Marktanner

2018

The Journal of International Trade & Economic Development

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Using a novel panel dataset of Egyptian governorates for the period 1992-2007, we investigate the effects of aggregate and sectoral foreign direct investment (FDI) on Egypt's economic growth. We distinguish between FDI in the manufacturing, agriculture and service sector. The similarity of governorates in terms of institutional characteristics like culture, language, and legal framework and the consistency of the data collection process enables an effective estimation of the effect of FDI on Egypt's economic growth. Employing General Methods of Moments (GMM) panel estimations, we find that neither aggregate nor sectoral FDI has an unconditional effect on economic growth. We also reject human capital as a channel of absorptive capacity, but reveal an interesting effect of FDI in the service sector on economic growth in interaction with domestic private investment (DPI). Service FDI promotes economic growth only if the host governorate has a minimum threshold of DPI to absorb foreign knowledge and technology.

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“…Tsaurai (2018) found that FDI promotes stock market improvement through its influence on human capital, which induces economic expansion. A closely related study for OECD indicates FDI inflows to both ITC-base and non-ICT base do not induce economic progress (Gönel and Aksoy 2016). The finding further showed FDI influence on ICT-base could be felt only if the economy has achieved the minimum threshold of its absorptive capacity.…”

Section: Literature Reviewmentioning

confidence: 93%

Sustaining Economic Growth in Sub-Saharan Africa: Do FDI Inflows and External Debt Count?

Joshua

Babatunde

Sarkodıe

2021

JRFM

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The quest for the attainment of economic development is sought after by all global economies, which by effect is expected to transcend to improving livelihoods and standard of living. However, several factors hinder the process of achieving sustained economic development, especially in developing countries. In this regard, assessing the extent of economic expansion orchestrated by foreign direct investment (FDI) inflows in vulnerable economies such as Sub-Saharan Africa (SSA), particularly in the face of the significant fall in global FDI inflow, is worthwhile. In essence, this study ascertains the impact of FDI inflows and external debt on economic growth amidst decline in FDI inflows and excessive foreign borrowings. The mixed order of integration from the stationarity test underpins the adoption of autoregressive distributed lag (ARDL) approach for data covering the period 1990 to 2018. The empirical results found FDI inflows play a crucial role in achieving economic expansion in the region. On average, FDI inflows, external debt, and foreign aids are more useful in expanding the economy compared to trade openness and exchange rate. Thus, this study recommends the need for SSA to open its economic borders for external capital, viz. FDI. A peaceful economic and political environment is a pre-condition to attract and maintain potential foreign investors. Stability in exchange rates is critical in achieving growth in FDI and other foreign resources. However, caution is required, especially in administration of external resources. Particularly, contracting external debt must strictly be driven by economic reasons rather than political motivation. Borrowed funds could be injected mainly into productive streams with the highest investment returns to boost economic development.

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Revisiting FDI-led growth hypothesis: the role of sector characteristics

Cited by 25 publications

References 46 publications

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Sectoral FDI, absorptive capacity and economic growth – empirical evidence from Egyptian governorates

Sustaining Economic Growth in Sub-Saharan Africa: Do FDI Inflows and External Debt Count?

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