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Outward FDI and economic growth

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Title:Outward FDI and economic growth
Author(s):Dierk Herzer (German Institute for Economic Research (DIW), Berlin, Germany and University of Wuppertal, Wuppertal, Germany)
Citation:Dierk Herzer, "Outward FDI and economic growth", Emerald 37, (2010)
Keywords:Econometrics, Economic growth, International investments, National economy
Article type:Research paper
DOI:10.1108/01443581011075424 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Acknowledgements:JEL classification – F43, F21, C21, C22 The author would like to thank an anonymous referee for helpful comments.

Purpose – The purpose of this paper is to examine the impact of outward foreign direct investment (FDI) on economic growth.

Design/methodology/approach – Two econometric approaches are used: cross-country regressions for a sample of 50 countries and time-series estimators for the USA.

Findings – Both approaches tell the same story: outward FDI is positively associated with growth. This finding is robust to several model specifications, potential outliers, and different estimation techniques. In addition, Granger-causality tests for the USA indicate that causality is bidirectional, suggesting that increased outward FDI is both a cause and a consequence of increased domestic output.

Originality/value – Previous studies have primarily examined the firm- and industry-level effects of outward FDI – for example, on domestic investment, employment, and productivity. This paper, in contrast, deals with the effects of aggregate outward FDI on the economy as a whole.

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