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Impacts of Foreign Direct Investment on Economic Growth: Empirical Evidence from Australian Economy

Viral Pandya and Sommala Sisombat

International Journal of Economics and Finance, 2017, vol. 9, issue 5, 121-131

Abstract: This paper examines foreign direct investment (FDI) inflows and its impact on economic growth in Australia. FDI inflows are considered to be a vital source of economic growth or development for any economy and it plays big role in growth in gross domestic product (GDP), improvement in infrastructure, employment creation, export and trade performance. This paper examines the relationship between FDI and economic growth of Australia through regression analysis between FDI and different measures of economic growth. The multiple regressions is used to derive conclusion on importance of FDI. The results highlight that FDI inflows contribute to the Australian economy including a growth in GDP, export performance and employment. Mining and quarrying has been identified as an attractive sector in which it has contributed to 7% of GDP, a large amount of capital has been invested and employed intensive labor. The result reflects absence of relationship between FDI and economic growth of Australia as two out three variables shows poor relationship with FDI. The findings provide critical information to Australian policy decision makers to make an informed decision with regard to attractive investment sectors and policies in encouraging foreign investors to invest in the country.

Keywords: foreign direct investments; productivity; industry sectors; tradeable; non-tradeable sector; gross domestic product; economic impacts; export performance; economic growth (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2017
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