European Journal of Business Science and Technology 2022, 8(2):190-216 | DOI: 10.11118/ejobsat.2022.012

Effect of Foreign Direct Investment on Economic Growth and Domestic Investment: Evidence from OECD Countries

Emre Gökçeli1, Jan Fidrmuc2, Sugata Ghosh1
1 Brunel University London, United Kingdom
2 Université de Lille, France

This study assesses the impact of foreign direct investment (FDI) inflows on economic growth and domestic investment in a panel of Economic Co-operation and Development (OECD) countries during the period of 1990–2017 by utilizing the method of fixed-effects and system generalized method of moments (GMM). The findings show that FDI inflows are positively and significantly associated with the economic growth of the host economy. When considering the origin of FDI, we find that FDI from developed countries contributes to the growth rate in the receiving economy, while FDI from developing countries shows no significant effect. Importantly, FDI does not appear to crowd in or out domestic investment. Only FDI from developed countries is associated with crowding in of domestic investment.

Keywords: foreign direct investment, economic growth, domestic investment, crowding in/out, OECD
JEL classification: E22, F21, F23, F43, O47

Received: May 11, 2022; Revised: September 27, 2022; Accepted: November 17, 2022; Published: December 31, 2022  Show citation

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Gökçeli, E., Fidrmuc, J., & Ghosh, S. (2022). Effect of Foreign Direct Investment on Economic Growth and Domestic Investment: Evidence from OECD Countries. European Journal of Business Science and Technology, 8(2), 190-216. doi: 10.11118/ejobsat.2022.012
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