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The Effect of Inward Foreign Direct Investment on Economic Growth in Chinese Provinces

Hiroyuki Taguchi (tagusaya0710@s3.wh.qit.ne.jp) and Yining Wang (edithwang2011@yahoo.co.jp)
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Yining Wang: Graduate School of Humanities and Social Sciences, Saitama University, 255 Shim o-Okubo, Sakura-ku, Saitama, Japan.

Journal of Economic and Social Thought, 2017, vol. 4, issue 4, 387-399

Abstract: This article examines the effect of inward foreign direct investment (FDI) on economic growth with a focus on Chinese provinces by conducting the Granger causality and impulse response tests in a vector auto-regression (VAR) estimation. The study contributes to the reviewed literature by examining the FDI effect in such comprehensive ways as demand-side and supply-side models, and by clearing the endogeneity problem of targeted variables under a VAR framework. The main findings of this study were as follows. First, the positive effect of FDI on economic growth in Chinese provinces was confirmed by all the model estimations: statistical, demand-side and supply-side models. Second, from the regional perspectives, the positive effect of FDI on economic growth was found in the eastern region, but not in the non-eastern region. Third, no crowding-out effect of FDI on domestic capital formation was identified both in demand-side and supply side analyses.

Keywords: Inward foreign direct investment (FDI); Economic growth; Chinese provinces; Vector auto-regression estimation. (search for similar items in EconPapers)
JEL-codes: F21 O47 O53 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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