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Foreign Direct Investment Essay

445 words - 2 pages

In the past, there are quite a number of studies that were carried out based on the endogenous growth theory. Mixed effects were generated where some of the studies reported positive relationship between inward FDI and economic growth of host country while the other studies generated the opposite results. Some studies even found that there is no relationship between the FDI and economic growth of host country. The past studies are carried out in various forms, which includes studies on sector level, country level, and cross-countries.One study focusing on Malaysia by Mun, Lin and ...view middle of the document...

The overall result found was that there is a positive relationship between FDI and economic growth and specifically, the economic growth in coastal provinces is affected more by FDI as compared to in inland provinces. This result also supported by (Vu and Noy, 2009) in which the authors carry out research on the relationship between FDI and economic growth using sectoral data of six country members of the OECD. The six countries include Germany, Spain, Netherlands, Denmark, United Kingdom, and The United States. The authors aim to find out the sectors specific impact of FDI on the developed countries' economic growth level. The empirical findings showed that overall FDI has positively affects the economic growth of the countries studied even though the effects seem to vary across countries and sectors. In Khaliq (2007), similar sectoral analysis was done on Indonesia to examine the impact of FDI on economic growth by using sectoral data for FDI inflows in the country over the period 1997-2006. The author found that in the overall, FDI shows positive effect on economic growth of Indonesia in the aggregate level. However, when the effect is examined across different sector, the results generated are mixed where very few sector show negative effect of inward FDI.

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