Net inflows of foreign direct investment affect economic growth? A panel data analysis

Abstract

In this study we apply panel data analysis to investigate quantitative and qualitative nature of the impact of net inflows of foreign direct investment as a percentage of GDP (FDI) on economic growth in selected emerging market economies as a group. In theory, FDI is expected to have positive impact on the long-run growth rate of GDP. We test this hypothesis by running a growth regression based on the annual panel data on the sample of 10 emerging market economies. Our growth equation, in addition to FDI, includes the rate of domestic investment, inflation rate and the degree of trade openness (proxied by the share of exports in GDP) as explanatory variables. © Serhan Ciftcioglu, Behdad Etemad, 2013.