![Open Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextgreen.png)
![Restricted Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextred.png)
Understanding the Impact of Inward FDI and Economic Growth
With liberalization of trade and markets nations across globe are able to overcome capital scarcity with inflow of Foreign Direct Investment (FDI). FDI is an important factor in the globalization process as it provides opportunities and financial challenges around the world promotes stable and lasting economic links between countries through direct access to investors in home economies to production units of the host economies. Understanding the influence/impact of inward FDI on economic growth is a dynamic area to study for researchers, as the empirical evidence on impact of FDI inflow on and economic growth are mixed, which deserves fresh enquiry. Objective of this paper is to identify the long term equilibrium relationship among inward FDI and gross domestic product, which will help one to understand the impact of inward FDI on economic growth. Gross Domestic Product (GDP) is proxied for economic growth. This is an empirical research and the research design is longitudinal in nature. Results of this study indicate that there exist a long run cointegrating relationship between inward FDI and GDP, the two variables for the study period from 1970-2010. 1% change in GDP will raise FDI inflow by 4.37%. The adjustment coefficient of the Error Correction Term (ECT) is negative and statistically significant indicating positive adjustment effect, which ensures, that in case of any external shocks, the long term equilibrium can be reverted back, and will re-ensures equilibrium between FDI inflow and GDP.
User
Font Size
Information
- Bhattacharyya, B., & Palaha, S. (1996). Foreign Direct Investment in India: Facts and Issues, Occasional Paper 2,. New Delhi: Indian Institute of Foreign Trade.
- Bilgic, E. (2006). Causal relationship between Foreign Direct Investment and Econmic Growth in Turkey, www.diva_portal.orgdivagetdocment. Retrieved from www.diva_portal.orgdivagetdocment: 1. Emrah Bilgic (2006), “Causal relationship between Foreign Direct Investment and Econmic Growth in Turkey”, www.diva_portal.orgdivagetdocment
- Boon, K. (2001). Foreign Direct Investment and Economic Growth. Retrieved from www.oocities.com/hjmohd99/theses.html
- Borensztein, E., De Gregorio, J., & Lee, J. (1998). 3. Borensztein, E.,How does foreign direct investment affect economic growth? Journal of International Economics, Vol: 45, 115-135.
- Carkovic, M., & Levine, R. (2002). Does Foreign Direct Investment Accelerate Economic Growth? Minnesota: University of Minnesota, Department of Finance, available at: www//ssrn.com/abstract=314924).
- Chalapati Rao, K., & Biswajit, D. (2011). India’s FDI Inflows: Trends and Concepts, http://dx.doi.org/10.2139/ssrn.1770222. Retrieved from http://dx.doi.org/10.2139/ssrn.1770222.: 2. K.S.Chalapati Rao and Biswajit Dhar (2011), “India’s FDI Inflows: Trends and Concepts”, http: //dx.doi.org/10.2139/ssrn.1770222.
- Chowdhury, A., & Mavrotas, G. (2003). FDI and Growth: What Causes What? Sharing Global Prosperity. Helsinki: Wider.
- Dash, R. K., & Sharma, C. (2007). FDI, Trade and Growth in India: A modified causality analysis. Journal of Indian School of Political Economy, Vol 19 (3) , 451-467.
- De Gregorio, J. (1992). Economic Growth in Latin America. Journal of Development Economics, 39, 58-84.
- De Mello, L. (1997). Foreign Direct Investment in Developing Countries and Growth: A Selective Survey. Journal of Development Studies, 34(1), 1-34.
- Do, T. (2005). The impact of Foreign Direct Investment and Openness on Vietnamese economy. Retrieved from www.essays.se/essay/de881759c9: www.essays.se/essay/de881759c9
- Dritsaki, M., Dritsaki, C., & Adamopoulos, A. (2004). A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth in Greece. American Journal of Applied Sciences 1 (3), 230-235.
- Georgantopoulos, A. G., & Tsamis, A. D. (2011). The Causal Links between FDI and Economic Development: Evidence from Greece. European Journal of Social Sciences, Vol.27(1) , 12-20.
- Henrik, H., & Rand, J. (2005). On the Caual links between FDI and garowth in developing countries. UNUWider:United Nations University
- Jeyachandran, G., & Seilan, A. (2010). A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth for India. International Research Journal of Finance and Economics, 42 , 74-88.
- Jong, C. (2003). Do Foreign Direct Investment and Gross Domestic Investment Promote Economic Growth? Review of Development Economics, Vol: 7, (1)., 44-57.
- Kholdy, S., & Sohrabian, A. (2005). Financial Markets, FDI, and Economic Growth: Granger Causality Tests in Panel Data Model. Moscow : EFA 2005 Moscow Meetings.
- Li, X., & Liu, X. (2005). 2Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship. World Development. Vol:33(3), 393-407.
- Ray, S. (2012). Impact of Foreign Direct Investment on Economic Growth in India: A Cointegration Analysis. Advances in Information Technology and Management, 2(1), 187-201.
- Salisu, A. A. (2004). The Determinants and Impact of Foreign Direct Investment on Economic Growth in Developing Countries: A study of Nigeria. Indian Journal of Economics, 333-342.
- Vittorio, D., & Marani, U. (2007). Do institutions matter for FDI? A comparative analysis for MENA Countries. Retrieved from ideas.repec.org/p/pra/mprapa/2426.html: ideas.repec.org/p/pra/mprapa/2426.html
- Zhang, K. H. (2001). “Does Foreign Direct Investment Promote Economic growth? Evidence from East Asia and Latin America. Contemporary Economic Policy, 19 (2), 175-185.
![](https://i-scholar.in/public/site/images/abstractview.png)
Abstract Views: 304
![](https://i-scholar.in/public/site/images/pdfview.png)
PDF Views: 105