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Does Foreign Direct Investment Promote Growth? Panel Data and Time Series Evidence from Less Developed Countries, 1970-2002

Prabirjit Sarkar ()

MPRA Paper from University Library of Munich, Germany

Abstract: The present study casts some doubt on the growth-promoting effect of foreign direct investment (FDI), which is widely supported by the proponents of financial globalization. The panel data analysis of 51 less developed countries shows a rising relationship between growth and FDI (relative to gross capital formation) only for the group of 11 relatively rich and open-economy countries. The time-series analysis observes meaningful positive relationships between FDI and growth only for 3 countries belonging to this group and some other countries. But by and large no long-term positive relationship exists between the two irrespective of income levels, openness and FDI-dependence.

Keywords: Foreign Direct Investment; Financial Globalization; Liberalization (search for similar items in EconPapers)
JEL-codes: F02 F40 F50 O10 O16 O50 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-cwa and nep-fdg
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