Effect of Foreign Direct Investment on Economic Growth and Domestic Investment: Evidence from OECD Countries

Emre Gökçeli, Jan Fidrmuc and Sugata Ghosh
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Emre Gökçeli: Brunel University London, United Kingdom
Sugata Ghosh: Brunel University London, United Kingdom

European Journal of Business Science and Technology, 2022, vol. 8, issue 2, 190-216

Abstract: This study assesses the impact of foreign direct investment (FDI) inflows on economic growth and domestic investment in a panel of Economic Co-operation and Development (OECD) countries during the period of 1990-2017 by utilizing the method of fixed-effects and system generalized method of moments (GMM). The findings show that FDI inflows are positively and significantly associated with the economic growth of the host economy. When considering the origin of FDI, we find that FDI from developed countries contributes to the growth rate in the receiving economy, while FDI from developing countries shows no significant effect. Importantly, FDI does not appear to crowd in or out domestic investment. Only FDI from developed countries is associated with crowding in of domestic investment.

Keywords: foreign direct investment; economic growth; domestic investment; crowding in/out; OECD (search for similar items in EconPapers)
JEL-codes: E22 F21 F23 F43 O47 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Effect of Foreign Direct Investment on Economic Growth and Domestic Investment: Evidence from OECD Countries (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:men:journl:v:8:y:2022:i:2:p:190-216

DOI: 10.11118/ejobsat.2022.012

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