Foreign Direct Investment, GDP Growth and Trade Liberalization : Evidence from Pioneering ASEAN Members

This paper revisits the argument on the contentious causality relationship between net FDI inflows and GDP among the pioneering Association of Southeast Asian Nations (ASEAN-5) members using data from 1970 till 2013. Although two-way correlations exist between these two variables in these countries, a careful analysis of these relationships using the fully modified ordinary least squares (FMOLS) regressions and the Vector Error Correction (VEC) model shows that causality exists only with on Thailand but the relationship is negative. The evidence from Thailand shows that GDP growth drives FDI outflows more than attracting FDI inflows. The results of all other members were not significant