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Does Foreign Direct Investment Matter Anymore?

John C. Edmunds and Gaofeng Zou

Applied Economics and Finance, 2015, vol. 2, issue 4, 95-102

Abstract: Although Foreign Direct Investment (FDI) is widely believed to raise the receiving country¡¯s economic growth, the statistical evidence to support that belief is weak. The macro-level data portray a mixed set of results. FDI neither raises nor lowers a country¡¯s economic growth in the time range from the year when the FDI comes in to three years after it arrives. There are many possible explanations why the data show such a weak association between FDI and economic growth. These include reasons why the data do not show the benefit, even though the benefit exists; and reasons why FDI might not raise a country¡¯s economic growth. In the data that we examined, increases in a country¡¯s national stock market capitalization were more positively associated with the country¡¯s subsequent economic growth.

Keywords: foreign direct investment; international finance; economic development (search for similar items in EconPapers)
JEL-codes: F21 F3 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:rfa:aefjnl:v:2:y:2015:i:4:p:95-102