Abstract

The paper works out the relationship between foreign direct investment (FDI) and economic growth in the five ASEAN countries namely, namely Indonesia, Malaysia, Philippines, Singapore and Thailand over the period 1970-2007. The empirical analysis is based on cointegration and causality test, both at the individual level and panel level. The results confirm that foreign direct investment and economic growth are cointegrated at the panel level, indicating the presence of long run equilibrium relationship between them. This is, however, true only for Singapore and Thailand at the individual country level. The Granger causality test further gives evidence that there is bidirectional causality between foreign direct investment and economic growth both at the panel level as well as individual country level except Malaysia.

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