Aveneu Park, Starling, Australia

(Choe, coefficient of correlation between FDI and

(Choe, 2003) used data from 80 countries from 1971 to 1995 and used a panel VAR
model to conclude that there is a strong relationship exists between FDI and
economic growth. It further found that economic growth causes GDI, whereas GDI
does not cause economic emergence.(Mencinger,
2003) used
a sample of 8 EU nations to check the relationship between economic growth and
FDI. They concluded that FDI have relationship with financial increase due to
spillover effect. The discipline further concluded that there was a negative coefficient
of correlation between FDI and growth.

(Omran, 2003) conducted research on Arab countries related to FDI, economic
growth, and financial development. They discovered that FDI will have a positive
degree effect on the growth of Arab nations if there may be an interplay with
economic variables at a given threshold level of improvement. They concluded
that domestic financial reform and liberal commercial policies final result in
promoting FDI in a country. FDI brand a positive impact on economic emergence through
human resource capital(HRM) and efficient use of technology.

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By collecting data from 11 Central and Eastern
European countries by (Eller, 2006) examined the impact of financial sector FDI on economic growth
through effective measures taking sample size of 1996-2003. In this cogitation,
results expose that quality of FDI control the financial sector’s exploit toward
growth within rising markets.

(J.B. Ang,
analyzed the FDI growth in Malaysia for understanding the relationship between
economic and financial growth and FDI. this study uses fourth dimension serial
publication data from 1965-2004 and discovered that FDI and financial development
are positively associated to outcome in the long run. The study also indicates
that economic growth effect FDI growth in the long run.   (J.B.  Ang, 2009) examines the role FDI yet economic improvement in Thailand by using
yearly series data from the time period of 1970 to 2004. Finding of this study reveal
that pecuniary development arouse economic development whereas output expanding
upon in the long run effects negatively through FDI.

(Choong, 2009) analyze the endogenous growth model between FDI and financial
development in Malaysia for the period 1970-2001. Finding of this study expose
that FDI, labor, government expenditure, and investment play a crucial role in
economic growth and FDI in local economic wealth. Moreover, the study
appearance that FDI and financial development together exercise a significant
effect on Malaysia’s growth execution.

(Kundan, 2010) used aggregate annual clip serial data from 1980-2006 for Nepal
attain from the IMF to find out the relationship among FDI and economic growth.
By implementing the OLS method and Granger causality test, this study found a
long-run relationship between the variables causality flow from FDI to gross domestic
product growth rate(GDPGR).

(Shahbaz, 2010) conducted a study to explore the roles of foreign capital inflow
and domestic financial sector development on economic growth in Pakistan. This study
uses annual data series from the World Bank and economic study of Pakistan over
the period 1971 to 2008 and implements an ARDL bounds testing approach to
co-integration and error correction model (ECM) for long-run and short-run
relationships. It reveals that foreign capital inflow have a positive effect on
economic growth in this country (The World Bank,2002).

By Adopting the same approach (Bekhet, 2015) used bound test for co-integration and Granger causality to
evaluate the shot-run and long-run relationships among FDI, GDP, SMI, M2 and
Economic openness (EO). They found a long-run and short-run relationship
between FDI and it’s determinants, and Granger causality suggests a different
causal relationship among the variables in this study.

(Faisal, 2016) used ARDL model, for investigating the relationship between
economic growth, FDI, stock price, and domestic credit to private sector (DCPS)
in China. The findings indicated a unidirectional short-run Granger causality
from stock prices to economic emergence and from economic growth to FDI.

This paper examines the short-run and
long-run relationship among the series of variables such as foreign direct
investment, economic growth, domestic credit to private sector, money supply
and inflation rate for the period of 1987-2014. The results show that FDI, M2 have
positive effect on GDP and also revealed that domestic credit to private sector
is the determinant of FDI. They further concluded that FDI Granger cause GDP
& vice versa. (L. do Rosário V. D., 2017).

The above demonstrated literature related
to the issue of FDI and economic growth it can be concluded that there are different
factors affecting the relationship between FDI economic growth, as political
conditions vary from country to country. With some studies reveal a positive
relationship among FDI & economic growth, but some studies found a negative
relationship between two. This paper examines the relationship between FDI and
economic growth among the particular variables in Pakistan by using OLS
regression method and Granger causality (GC) unidirectional.      


Ang, J. B. (2008). “Financial development and the FDI-growth nexus: the
Malaysian experience”. Journal of Applied Economics, 41,

Ang, J.
B. (2009). Foreign direct investment and its impact on the Thai economy: The
role of financial development. Journal of Economics and Finance, 33,

H. A., & Al-Smadi, R. W. . (2015). Determinants of
Jordanian foreign direct investment inflows: Bounds testing approach.
Economic Modelling, 46, 27-35.

J. I. (2003). “Do foreign direct investment and gross domestic investment promote
economic growth?”. Review of Development Economics, 7(1), 44-57.

C.-K. a. L., K.-P. . (2009). Foreign direct
investment, financial development and economic growth: The case of Malaysia.
Macro-economics and Finance in Emerging Market Economies, 2,

M., Haiss, P. and Steiner, K. (2006). “Foreign direct investment in the financial sector and economic
growth in Central and Eastern Europe: the crucial role of the efficiency
channel”. Journal of Emerging Markets Review, 7, 300-319.

F., Muhamad, P. M., & Tursoy, T. .
(2016). Impact of Economic Growth, Foreign Direct Investment and
Financial Development on Stock Prices in China: Empirical Evidence from Time
Series Analysis. International Journal of Economics and Financial, 6(4), 1998-2006.

M. (2010). A time series analysis of foreign direct investment and economic
growth: A case study of Nepal. International Journal of Business and
Management, 5(2), 144-148.

L. do
Rosário V. D., Y. K. L. X. (2017). The Relationship between FDI, Economic Growth and Financial
Development in Cabo Verde. International Journal of Economics and
Finance, 9(5).

J. (2003). “Does foreign direct investment always enhance economic growth?”.
KYKLOS, 56 (4), 491-508.

M. a. B., A. . (2003). “Foreign direct investment,
financial development and economic growth: evidence from the Arab countries”.
Review of Middle East Economics and Finance, 3, 231-249.

M. a. R., M.M. . (2010). Foreign capital
inflows-growth nexus and role of domestic financial sector: An ARDL
co-integration approach for Pakistan. Journal of Economic Research, 15,



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