Economics Research

Economic Growth and Foreign Direct Investment in the Developing Countries: An Analysis Based on Panel Data

Document Type : Research Paper

Authors

Alimohammad Ahmadi 1
Jalal Dehnavi 2
Amin Haghnejad 3

1 Faculty of Economics, Tarbiat Modares

2 Ph.D. Student in Economics, Ferdowsi University of Mashhad

3 Ph.D. Student in Economics, University of Isfahan

Abstract
This paper analyzes the Granger causality between economic growth and
Foreign Direct Investment (FDI) inflows in the three income groups of 112
developing countries over the period of 1980 to 2006. For this purpose, panel data
techniques, including panel unit root, panel cointegration, and panel vector error
correction model, have been applied. The research findings indicate that; firstly,
there is a positive and statistically significant relationship between economic growth
and FDI inflow in each of three groups. Secondly, these findings, also, provide
strong evidence from gtanger causality between these two variables in all income
groups.

Keywords

Foreign Direct Investment
Economic Growth
Panel Data
Granger Causality

  • Receive Date 13 April 2010
  • Revise Date 30 August 2010
  • Accept Date 28 November 2010

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