Foreign Direct Investment, Domestic Investment and Economic Growth in China: A Time Series Analysis

Sumei Tang, E. A. Selvanathan and S. Selvanathan
Authors registered in the RePEc Author Service: Saroja Selvanathan and Eliyathamby Antony Selvanathan

The World Economy, 2008, vol. 31, issue 10, 1292-1309

Abstract: This paper investigates the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988–2003 using a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques. The results show that while there is a bi‐directional causality between domestic investment and economic growth, there is only a single‐directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China.

Date: 2008
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https://doi.org/10.1111/j.1467-9701.2008.01129.x

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Working Paper: Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:31:y:2008:i:10:p:1292-1309

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