Ditch or Bump? Foreign Direct Investment and Economic Growth: Evidence from the OECD Economies

Abstract

Foreign Direct Investment (FDI) has a long standing history of contributing to economic growth of nations. Nations invest and get invested, however, focus has always been on investing or been invested but the impact created as a result of the two on the economies have not yet been examined. Whether the impact of the difference creates ditch or bump get investigated in this research work, employing an extended Cobb Douglas function. Our estimation methods were Fully Modified Least Square (FMOLS) and Auto-regressive Distributed Lag Models (ARDL). We conducted a preliminary test to avoid spurious regression results by using ARDL Bound test, Augmented Dickey-Fuller and Phillips-Perron unit root test for cointegration and stationerity test. We found that some economies saw ditches with the difference whilst others experienced bumps, however, others felt no impact with the difference.

Keywords

• foreign direct investment
• economic growth
• human capital
• capital stock