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Wiley InterScience | ||
  World EconomyVolume 29 Issue 1, Pages 9 - 19 Published Online: 10 Jan 2006 Journal compilation © 2010 Blackwell Publishing Ltd
Abstract | References | Full Text: PDF (Size: 80K) | Related Articles | Citation Tracking  FDI and Growth: What Causes What? The authors would like to thank the editor of this Journal and the anonymous referee for helpful comments and suggestions. An earlier version of this paper was presented at the WIDER Conference on 'Sharing Global Prosperity', 6–7 September, 2003, Helsinki. Copyright © United Nations University 2006 ABSTRACTThis paper examines the causal relationship between FDI and economic growth by using an innovative econometric methodology to study the direction of causality between the two variables. We apply our methodology, based on the Toda-Yamamoto test for causality, to time-series data covering the period 1969–2000 for three developing countries, namely Chile, Malaysia and Thailand, all of them major recipients of FDI with a different history of macroeconomic episodes, policy regimes and growth patterns. Our empirical findings clearly suggest that it is GDP that causes FDI in the case of Chile and not vice versa, while for both Malaysia and Thailand, there is a strong evidence of a bi-directional causality between the two variables. The robustness of the above findings is confirmed by the use of a bootstrap test employed to test the validity of our results. |
