Spatial Estimation of the Nexus between the PRC’s Foreign Direct Investment and ASEAN’s Growth

Nathapornpan Piyaareekul Uttama
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Nathapornpan Piyaareekul Uttama: Asian Development Bank Institute

No 597, ADBI Working Papers from Asian Development Bank Institute

Abstract: Forging closer economic relations between the People’s Republic of China (PRC) and the Association of Southeast Asian Nations (ASEAN) over the last 2 decades has contributed to building a stronger ASEAN economy. It is particularly important to know how the PRC’s foreign direct investment responds to ASEAN’s economic performance. This study investigates the causal relationship between the PRC’s foreign direct investment and economic growth among the 10 ASEAN member countries from 1995 to 2013. Panel unit root tests, a spatial panel vector autoregressive model, and spatial Granger causality are employed as empirical techniques for spatial panel estimation. The empirical results reveal that the PRC’s direct investment in ASEAN caused economic growth in ASEAN, and economic growth in ASEAN resulted in the PRC’s direct investment in ASEAN. This finding raises potentially interesting external investment policy implications.

Keywords: foreign direct investment; direct investment; investment; the People’s Republic of China; Association of Southeast Asian Nations; economic growth (search for similar items in EconPapers)
JEL-codes: C33 F23 O47 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-11-01
New Economics Papers: this item is included in nep-cna and nep-sea
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