Title: Reconsidering the relationship between foreign direct investment and growth

Authors: Carlos Encinas-Ferrer; Eddie Villegas-Zermeño

Addresses: Mexican National Researchers System Level II, Universidad del Valle de Atemajac Campus Leon, Blvd. Juan Alonso de Torres 3538, San José de las Piletas, León, P.C. 37330, Gto. México ' Departamento de Ciencias Económico Administrativas, Universidad Iberoamericana León, Blvd. Jorge Vertiz Campero 1640, Col. Cañada de Alfaro, 37238 León, Gto. Mexico

Abstract: It has been assumed that foreign direct investment (FDI) is a variable that explains economic growth (EG). As investment (I) is the dynamic element of gross domestic product (GDP), therefore, FDI, as part of total investment, should be also the independent variable and GDP growth the dependent one. However, many studies in many countries have shown the contrary, there is not such a causal relationship between FDI and GDP. In our investigation, we include the study of the cases of Mexico, China, Brazil and the Republic of Korea. It is our hypothesis that there is not a causal relationship between FDI, as the independent variable, and GDP growth as the dependent one in the selected countries and that this is in part because FDI is a small proportion of total (national and foreign) direct investment and so its impact is reduced.

Keywords: FDI; foreign direct investment; GDP; gross domestic product; economic growth; gross fixed capital formation.

DOI: 10.1504/IJCEE.2019.102492

International Journal of Computational Economics and Econometrics, 2019 Vol.9 No.4, pp.240 - 267

Received: 12 Feb 2016
Accepted: 16 Feb 2017

Published online: 30 Sep 2019 *

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