FDI and Economic Growth: A Changing Relationship Across Country and Overtime

Arshad Hayat and Tomas Cahlik ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we use a threshold regression model to estimate a threshold level of natural resource abundance and split the sample of 70 countries into groups of low-natural resource and high-natural resource groups. We found evidence that FDI has a positive impact on economic growth of the host country if the host country’s natural resource sector is below the threshold. However, FDI inflow doesn’t have any significant impact on growth in countries with natural resource sector larger than the threshold. In the end, we apply a Markov regime switching model (MSM) to a time series data from Pakistan and found that Pakistan’s economy experienced 2 states. While in the state 1 the economy didn’t experience any FDI induced economic growth, it did receive a strong FDI induced economic growth in state 2.

Keywords: FDI; Economic Growth; Natural Resources; Threshold Model; Markov Switching Model (search for similar items in EconPapers)
JEL-codes: O47 P28 P45 (search for similar items in EconPapers)
Date: 2017-04-10
New Economics Papers: this item is included in nep-ene and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/78577/1/MPRA_paper_78577.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:78240

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