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

Parantap Basu; Chandana Chakraborty; Derrick Reagle

doi:10.1093/ei/cbg024

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

Parantap Basu, Chandana Chakraborty, Derrick Reagle

Economics

Research output: Contribution to journal › Article › peer-review

159 Scopus citations

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.

Original language	English
Pages (from-to)	510-516
Number of pages	7
Journal	Economic Inquiry
Volume	41
Issue number	3
DOIs	https://doi.org/10.1093/ei/cbg024
State	Published - Jul 2003

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

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