THE EFFECTS OF FOREIGN DIRECT INVESTMENT INWARDS AND OUTWARDS ON ECONOMIC GROWTH: EVIDENCE FROM THE TOP 20 LARGEST ECONOMIES IN THE WORLD (1992-2016)

Year 2018, Volume: 5 Issue: 1, 108 - 126, 30.03.2018

Omer Yalcinkaya , Muhammet Dastan

https://doi.org/10.17261/Pressacademia.2018.788

Abstract

Purpose- In this study, considering the capital exporter/importer
positions of the World’s top 20 largest economies (W-20) grouped as developing
(W-8) and developed (W-12) according to the development level, the effects of
foreign direct investment inwards/outwards on economic growth (GDP/GNP) are
analyzed econometrically.
 

Methodology- In the study, econometric models, generated by
extending Cobb-Douglas type of production function were estimated by employing
second generation panel data analysis that takes cross-sectional dependence
into consideration for the period 1992-2016. Findings- As a result
of the study, both the direct foreign investment inwards and outwards have a
significant influence on the economic growth performances of the developed W-12
economies within the examination period. On the contrary, it is determined that
the foreign direct investment inwards have a significant effect on economic
growth performances of the developing W-8 economies, while foreign direct
investment outwards do not have any impact on these economies. 

Conclusion- These results indicate that the enhancement
possibilities of economic growth performances provided by GNP by expanding
production possibilities abroad of W-12 and W-8 economies are high and low,
respectively. 

Keywords

Foreign direct investment inwards and outwards, GDP, GNP, top 20 largest economies, second generation panel data analysis

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