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Foreign Direct Investment, Growth of Output Indicators and Economic Growth in China: Empirical Evidence on Causal Links

Ayamba Emmanuel Caesar, Chen HaiBo, Thomas Bilaliib Udimal and Andrew Osei-Agyemang
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Ayamba Emmanuel Caesar: School of Finance and Economics, Jiangsu University, Zhenjiang, China,
Chen HaiBo: School of Finance and Economics, Jiangsu University, Zhenjiang, China
Thomas Bilaliib Udimal: School of Management and Engineering Science, Jiangsu University, Zhenjiang, China,
Andrew Osei-Agyemang: School of Finance and Economics, Jiangsu University, Zhenjiang, China

International Journal of Economics and Financial Issues, 2018, vol. 8, issue 3, 315-322

Abstract: This paper examines the causality between foreign direct investment (FDI), growth of output indicators and gross domestic product (GDP) in China between 1995 and 2016 using Granger causality test based on the vector error correction model. In contemporary times, attention has been drifted from overall FDI as engine of growth in the analysis of economic growth to sectoral composition of the economy. This paper considers the growth of output indicators (manufacturing, service and agricultural sectors) as engines of growth. The results indicate a bidirectional causal link between GDP and FDI in the long and short runs. There was however a uni-directional relation between GDP and manufacturing and service sectors in the long run. Ashort run causal link exists between GDP and manufacturing but not for service. The study does not confirm causality to run from GDP to agriculture.

Keywords: Foreign Direct Investment; Economic Growth; Vector Error Correction Model Causality (search for similar items in EconPapers)
JEL-codes: F21 F43 (search for similar items in EconPapers)
Date: 2018
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