Authors: Rudra P. Pradhan; Mak B. Arvin; Neville R. Norman
Addresses: Vinod Gupta School of Management, Indian Institute of Technology, Kharagpur WB 721302, India ' Department of Economics, Trent University, Peterborough, Ontario K9J 7B8, Canada ' Department of Economics, University of Melbourne, Victoria-3053, Australia; Department of Economics, University of Cambridge, Cambridge, CB2 9DE, UK
Abstract: This paper examines dynamic interactions between foreign direct investment (FDI) and economic growth using panel-data cointegration and causality tests. We present our results for 34 Eurasian countries for which previous research on this subject has not hitherto been performed. We find that that FDI and economic growth have both short-term and long-term causal linkages to each another and often to other identified variables. Our findings support the notion that donor countries supplying FDI tend to use FDI as an instrument of financial diplomacy. When the recipient countries experience enhanced economic growth through the FDI they receive, goodwill and more cordial relationships are fostered.
Keywords: foreign direct investment; FDI; economic growth; panel-data cointegration test; panel-data Granger causality test; financial diplomacy; economic diplomacy.
International Journal of Diplomacy and Economy, 2014 Vol.2 No.1/2, pp.139 - 164
Received: 29 Oct 2013
Accepted: 24 Jan 2014
Published online: 28 Apr 2014 *