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IMPACT OF OUTWARD FDI: Evidence from Emerging Economies for Policy

Pravakar Sahoo and Ashwani Bishnoi ()
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Ashwani Bishnoi: Institute of Economic Growth, Delhi

No 433, IEG Working Papers from Institute of Economic Growth

Abstract: The study makes an attempt to contribute to the ongoing policy debate on whether OFDI has a complementary or substitution effect on domestic investment and hence, growth. For the purpose, the current paper uses panel data analysis to understand the impact of OFDI for 14 emerging economies in the period 1981-2019. We supplement the cross-country evidence with a time series analysis for India, given that FDI outflows from the country have been steadily increasing over the years. The results confirm the positive effect of OFDI on economic growth, but the substitution effect for domestic investment. This indicates that the OFDI positively affects growth through its effect on trade and other positive spillover effect, rather than domestic investment. However, in case of India, the findings support the complementary effect of OFDI on domestic investment.

Keywords: OFDI; Growth; Domestic Investment; Emerging Countries; India (search for similar items in EconPapers)
JEL-codes: F21 F23 F62 O40 R11 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-07
New Economics Papers: this item is included in nep-fdg and nep-int
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Published as Institute of Economic Growth, Delhi, July 2021, pages 1-26

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