FDI, Trade, and Economic Growth: A Dynamic Panel Study on Global Economy

Abstract

This chapter attempts to investigate and analyze the worldwide long-run dynamics among foreign direct investment (FDI) inflow, international trade, and economic growth empirically in the era of globalization. Impact of FDI on economic performances has been a burning topic during the current age. Different theoretical studies viewed both positive and negative impacts of inflow of foreign capital in terms of FDI. We empirically test the relationships among FDI and trade, gross domestic product by using the data for top 20 FDI-hosting countries sourced from UNCTAD in a dynamic panel frame over the period of 1991–2016. The stochastic properties are looked into by carrying out panel data unit root tests developed by Levin, Lin, and Chu (2002) and Im, Pesaran, and Shin (2003). We carry out the generalized method of moments estimates. Empirical findings suggest that inflows of FDI significantly promote economic growth in selected economies.

Citation

Bhuimali, A., Sengupta, P.P., Laha, S.S. and Sinha, M. (2019), "FDI, Trade, and Economic Growth: A Dynamic Panel Study on Global Economy", Bhattacharyya, R. (Ed.) The Gains and Pains of Financial Integration and Trade Liberalization, Emerald Publishing Limited, Leeds, pp. 77-87. https://doi.org/10.1108/978-1-78973-999-220191013