Liberalization, FDI, and Growth In Developing Countries: A Panel Cointegration Approach

Authors

Parantap Basu, Fordham University
Chandana Chakraborty, Montclair State UniversityFollow
Derrick Reagle, Fordham University

Document Type

Article

Publication Date

7-1-2003

Journal / Book Title

Economic Inquiry

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.

DOI

10.1093/ei/cbg024

Journal ISSN / Book ISBN

EISSN: 1465-7295

MSU Digital Commons Citation

Basu, Parantap; Chakraborty, Chandana; and Reagle, Derrick, "Liberalization, FDI, and Growth In Developing Countries: A Panel Cointegration Approach" (2003). Department of Economics Faculty Scholarship and Creative Works. 32.
https://digitalcommons.montclair.edu/economics-facpubs/32

Published Citation

Basu, P., Chakraborty, C. and Reagle, D. (2003), Liberalization, FDI, and Growth in Developing Countries: A Panel Cointegration Approach. Economic Inquiry, 41: 510-516. https://doi.org/10.1093/ei/cbg024