publication . Article . 2009

Impact of foreign direct investment volatility on economic growth of asean-5 countries

  • Published: 01 Jan 2009
This study examines the impact of volatility of FDI, rather than its level on the economic growth of ASEAN-5 countries. Using bounds testing approach, we show that FDI volatility retards long-run economic growth in Indonesia, Malaysia, the Philippines and Thailand. Our results suggest that the economic growth of Indonesia is the most susceptible to the adverse effect of FDI volatility. These findings, which are robust to different measures of FDI volatility, are of concern in dealing with the economic growth of developing countries in the ASEAN region, which rely heavily on FDI.
free text keywords: Foreign direct investment, economic growth, volatility, cointegration, ASEAN, ARDL, jel:F3, jel:F0

De Mello, L. (1997) “Foreign Direct Investment in Developing Countries and Growth: A Selective Survey”, Journal of Development Studies 34, 1-34.

Engle, R. (1982) “Autoregressive Conditional Heteroskedasticity with Estimates of The Variance Of U.K. Inflation”, Econometrica 50, 987-1008.

Engle, R., Ito, T. and Lin, W.L. (1990) “Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in The Foreign Exchange Market”, Econometrica 58, 525-542.

Guillaumont, P. and Chauvet, L. (2001) “Aid and Performance: A Reassessment”, Journal of Development Studies 37, 66-92.

Lensink, R. and Morrissey, O. (2000) “Aid Instability as A Measure of Uncertainty and the Positive Impact of Aid on Growth”, Journal of Development Studies 36, 31-49. [OpenAIRE]

Lensink, R. and Morrissey, O. (2002) “The Volatility of FDI, Not the Level, Affect Growth in Developing Countries”, The CDS Research Report Series, University of Groningen, 1-35. [OpenAIRE]

Lensink, R. and Morrissey, O. (2006) “Foreign Direct Investment: Flows, Volatility, and the Impact on Growth”, Review of International Economics 14, 478-493. [OpenAIRE]

Narayan, P.K. (2005) “The Saving and Investment Nexus for China: Evidence from Cointegration Tests”, Applied Economics 37, 1979-90.

Ozturk, I. (2007) “Foreign direct investment - growth nexus: a review of the recent literature”, International Journal of Applied Econometrics and Quantitative Studies 4(2), 79 - 98.

Pesaran, M.H. and Pesaran, B. (1997) Working with Microfit 4.0: Interactive Econometric Analysis. Oxford: Oxford University Press. [OpenAIRE]

Pesaran, M.H. and Shin, Y. (1999) “An Autoregressive Distributed Lag Modeling Approach to Cointgeration Analysis”, in S. Strom (Ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium. Cambridge University Press, Cambridge. [OpenAIRE]

Pesaran, M.H., Shin, Y. and Smith, R. (2001) “Bounds Testing Approaches to the Analysis of Level Relationships”, Journal of Applied Econometrics 16, 289-326. [OpenAIRE]

Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue