Is Foreign Direct Investment a Real Driving Force of Economic Growth? A Panel Data Analysis

Latif Khalilov () and Chae-Deug Yi ()
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Latif Khalilov: Pusan National University
Chae-Deug Yi: Pusan National University

Central European Journal of Economic Modelling and Econometrics, 2020, vol. 12, issue 3, 273-299

Abstract: The purpose of this empirical study is to find the relationship between economic growth and foreign direct investment (FDI) in the Commonwealth of Independent States (CIS) and Central and Eastern European Countries (CEECs) using endogenous technological change model. First, we combine the CIS and CEECs into one group to test our hypothesis, and then we test each group separately to account for heterogeneity and draw a conclusion whether FDI is indeed a driving force of the economy. Panel data have been used from 2003 to 2014 and different panel estimation methods have been applied. Additionally, we use the Generalized Method of Moments (GMM) panel estimator to control for endogeneity problem. The present study finds that FDI is an important factor explaining economic growth in the pooled group and CEECs, although it is not significant in the case of CIS.

Keywords: economic growth; FDI; human capital; research and development; panel analysis (search for similar items in EconPapers)
JEL-codes: C23 C26 F21 O10 O33 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:12:y:2020:i:3:p:273-299

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