Liberalization, FDI and growth in developing countries: A panel cointegration approach

Basu, P.; Chakraborty, C.; Reagle, D.

Abstract

Using a panel cointegration framework, the article explores the two-way link between FDI and growth for a panel of 23 developing countries. In addition, it investigates the impact of liberalization on the dynamics of the FDI and GDP relationship. A long-run cointegrating relationship is found between FDI and GDP after allowing for heterogeneous country effects. The cointegrating vectors reveal a bidirectional causality between GDP and FDI for more open economies. For relatively closed economies, long-run causality appears unidirectional and runs from GDP to FDI, implying that growth and FDI are not mutually reinforcing under restrictive trade and investment regimes.

Citation

Basu, P., Chakraborty, C., & Reagle, D. (2003). Liberalization, FDI and growth in developing countries: A panel cointegration approach. Economic Inquiry, 41(3), 510-516. https://doi.org/10.1093/ei/cbg024

• Journal Article Type: Article
• Publication Date: Jul 1, 2003
• Deposit Date: Feb 20, 2008
• Journal: Economic Inquiry
• Print ISSN: 0095-2583
• Electronic ISSN: 1465-7295
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 41
• Issue: 3
• Pages: 510-516
• DOI: https://doi.org/10.1093/ei/cbg024
• Public URL: https://durham-repository.worktribe.com/output/1601728