FDI, financial development and economic growth: evidence of causality from East and South East Asian countries

Abdus Samad and Muhammad Akhtaruzzaman

Global Business and Economics Review, 2014, vol. 16, issue 2, 202-213

Abstract: This paper empirically investigates causal relationship - short run and long run - among foreign direct investment (FDI), financial development, and economic growth in ten East and South East Asian countries using vector error correction model (VECM) and VEC Granger causality/Wald Exogeniety tests. The paper finds that in Singapore, Malaysia and China, GDP growth Granger causes FDI. On the other hand, financial market development (FMD) Granger causes FDI in Singapore, Malaysia, and Sri Lanka. Bidirectional Granger causality between GDP and FDI is observed in Indonesia and India. FDI does not Granger cause economic growth (GDP) in all ten countries under study during 1980-2010. It suggests that FDI follows either economic growth or financial market development in these countries.

Keywords: foreign direct investment; FDI; financial markets; market development; economic growth; Granger causality; Singapore; Malaysia; Sri Lanka; VECM. (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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