Relationship between FDI and Economic Growth in Selected Asian Countries: A Panel Data Analysis

This study examines empirically the relationship between FDI and economic growth using heterogeneous panel for the period 1983-2008. The empirical findings of Larsson panel co-integration show that FDI and economic growth are cointegrated. FMOLS results reveal that FDI and economic growth are positively related to each other. The results of panel homogeneous causality hypothesis show the existence of bi-directional causality between FDI and economic growth while the results of panel homogeneous non-causality hypothesis confirm the existence of unidirectional causality running from FDI to economic growth in selected panel. The results of heterogeneous causality hypothesis show the existence of bi-directional causality between FDI and economic growth only in case of Malaysia. The existence of uni-directional causality running from FDI to economic growth is observed in cases of Nepal, Singapore, Japan and Thailand whereas the uni-directional causality is also found running from economic growth to FDI for Pakistan, Bangladesh and Sri Lanka. However, no causality in any direction is found in cases of India, Maldives, Indonesia, China, Philippines, Korea Dem and Singapore.