On the Causal Links between FDI and Growth in Developing Countries

Henrik Hansen and John Rand

No RP2005-31, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: We analyse the Granger causal relationships between foreign direct investment (FDI) and GDP in a sample of 31 developing countries covering 31 years. Using estimators for heterogeneous panel data we find bi-directional causality between the FDI-to-GDP ratio and the level of GDP. FDI has a lasting impact on GDP, while GDP has no long-run impact on the FDI-to-GDP ratio. In that sense FDI causes growth. Furthermore, in a model for GDP and FDI as a fraction of gross capital formation (GCF) we also find long-run effects from FDI to GDP.

Keywords: Econometric models (Economic development); Foreign investments (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (24)

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Related works:
Journal Article: On the Causal Links Between FDI and Growth in Developing Countries (2006)
Working Paper: On the Causal Links between FDI and Growth in Developing Countries (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:unu:wpaper:rp2005-31

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