The effect of inward foreign direct investment on economic growth: The case of Chinese provinces

Hiroyuki Taguchi () and Yining Wang

MPRA Paper from University Library of Munich, Germany

Abstract: This article examines the effect of inward foreign direct investment (FDI) on economic growth with a focus on Chinese provinces by conducting the Granger causality and impulse response tests in a vector auto-regression (VAR) estimation. The study contributes to the reviewed literature by examining the FDI effect in such comprehensive ways as demand-side and supply-side models, and by clearing the endogeneity problem of targeted variables under a VAR framework. The main findings of this study were as follows. First, the positive effect of FDI on economic growth in Chinese provinces was confirmed by all the model estimations: statistical, demand-side and supply-side models. Second, from the regional perspectives, the positive effect of FDI on economic growth was found in the eastern region, but not in the non-eastern region. Third, no crowding-out effect of FDI on domestic capital formation was identified both in demand-side and supply side analyses.

Keywords: Inward foreign direct investment (FDI); Economic growth; Chinese provinces; Vector auto-regression estimation; Granger causality and Impulse responses (search for similar items in EconPapers)
JEL-codes: F21 O47 O53 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-int and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:80731

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