Correspondencia (n=114)

Atrayee Ghosh Roy and Hendrik F. Van den Berg (2006),in hisstudy “Foreign Direct Investment and Economic Growth: A Time-Series Approach”have focused on how foreign directinvestment(FDI) transfers technology from developed economies to less developed economies. Most FDI occurs between developed economies. This paper examines whether such FDI inflows have stimulated growth of the economy. The research applies time-series data to a simultaneous-equation model (SEM) that explicitly captures the bi-directional relationship between FDI and economic growth. FDI is found to have a significant, positive, and economically important impact on growth. Also, the SEM estimates reveal that FDI growth is income inelastic. These results imply that: (1) even a technologically advanced country benefits from FDI, (2) The gains from FDI are very substantial in the long run. Overall, the results

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Narayan Sethi and K. Uma Shankar Patnaik (2006), in his study “ImpactofInternationalCapital Flowson India’sEconomic Growth”concluded that Countries with well developed financial markets gain significantly from Foreign Direct Investment (FDI). Given the huge volume of capital flows and their influence on the domestic financial markets, understanding the behavior of the flows becomes very important especially at time liberalizing the capital account. This study examines the impact of internationalcapitalflowson India’sfinancialmarketsand economicgrowth.Italso examinestrendsand composition of capital inflows, changing pattern of financial markets in view of globalization, ascertain the impact of domestic financial policy variables on international capital flows and suggest policy implication thereof. By using monthly time series data, the study found that Foreign Direct Investment (FDI) is positively affecting the economic growth direct contribution, while Foreign Institutional Investment (FII) is negatively affecting the growth alb its, in a small way and make a preliminary attempt to test whether the international capital flows has positive impact on financial markets and economic growth. The empirical analysis using the time series data between April 1995 to December 2004 shows that FDI plays unambiguous role in contributing to economic growth.

Argiro Moudatsou and Dimitrios Kyrkilis (2009) in hisstudy,“FDI and Economic Growth: A Case of European Union and ASEAN Association ofSouth EastAsian Nations” attemptto address the causal-order between inward FDI and economic growth using a panel data set for two different Economic Associations that is EU (European Union) and ASEAN (Association of South Eastern Asian Nations) over the period 1970-2003. Three possible cases are investigated in this paper 1) Growth-driven FDI, is the case when the growth of the host country attracts FDI 2) FDI-led growth , is the case when the FDI improves the rate of growth of the host country and 3) the two way causal link between them. Empirical results obtained from heterogeneous panel analysis indicate the following

Regarding the EU countries the results support the hypothesis of GDP -FDI causality (growth driven

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GDP per capita and FDI in the cases of Indonesia and Thailand while in the cases of Singapore and the Philippines FDI is host country GDP growth motivated.

Andreas Johnson (2006), in his study “The Effects of FDI Inflows on Host Country Economic Growth”discusses and models the potential of FDI inflows to affect host country economic growth. The paper argues that FDI should have a positive effect on economic growth as a result of technology spillovers and physical capital inflows. Performing both cross-section and panel data analysis on a dataset covering 90 countries during the period 1980 to 2002, the empirical part of the paper finds indications that FDI inflows enhance economic growth in developing economies but not in developed economies.

However, economic growth could itself cause an increase in FDI inflows. Economic growth increases the size of the host country market and strengthens the incentives for market seeking FDI. This could result in a situation where FDI and economic growth are mutually supporting. However, for the case of most of the developing economies, even sustained economic growth is unlikely to result in market-seeking FDI due to the low income levels. Therefore, causality is primarily expected to run from FDI inflows to economic growth for these economies.

E. Borensztein, J. De Gregorio, J-W. Lee(1998)in his study,“How does foreign direct investment affect economic growth?” test the effect of foreign direct investment (FDI) on economic growth in a cross-country regression framework, utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. The results suggest that FDI is an important vehicle for the transfer of technology, contributing relatively more to growth than domestic investment. However, the higher productivity of FDI holds only when the host country has a minimum threshold stock of human capital. Thus, FDI contributes to economic growth only when a sufficient absorptive capability of the advanced technologies is available in the host economy.

Maria Carkovicand RossLevine,in theirstudy“Does Foreign Direct Investment Accelerate Economic

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offered special tax incentives and subsidies to attract foreign capital. An influential economic rationale for treating foreign capital favorably is that FDI and portfolio inflows encourage technology transfers that accelerate overall economic growth in recipient countries. While microeconomic studies generally, though not uniformly, shed pessimistic evidence on the growth effects of foreign capital, many macroeconomic studies find a positive link between FDI and growth. Previous macroeconomic studies, however, do not fully control for endogeneity, country-specific effects, and the inclusion of lagged dependent variables in the growth regression. After resolving many of the statistical problems plaguing past macroeconomic studies and confirming the results using two new databases on international capital flows, the study conclude that FDI inflows do not exert an independent influence on economic growth. Thus, while sound economic policies may spur both growth and FDI, the results are inconsistent with the view that FDI exerts a positive impact on growth that is independent of other growth determinants