Foreign direct investment, domestic investment and economic growth in China: A time series analysis

Arbeitspapier

In this paper, we investigate the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003. Towards this purpose, a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques are used. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China.

Object Details

• ISBN: 978-92-9230-063-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Research Paper ; No. 2008/19

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; International Investment; Long-term Capital Movements
• Subject: foreign direct investment ; domestic investment ; economic growth ; multivariate VAR system ; error correction model ; Direktinvestition ; Investition ; Wirtschaftswachstum ; VAR-Modell ; Fehlerkorrekturmodell ; China

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Tang, Sumei ; Selvanathan, E. A. ; Selvanathan, S.
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/63416
• Last update: 10.03.2025, 11:45 AM CET