The Impact of Foreign Direct Investment and Imports on Economic Growth: The Case of Jordan

This study aims to measure and analyze the impact of both Foreign Direct Investment (FDI) and Imports (M) on the Economic Growth (EG) of Jordan, over the period (1976‐2003). To achieve this, a production function was utilized by using FDI and Imports as two distinct factors among other factors of production. This study examines the relationship between variables (FDI, M and EG) through Vector Autoregression (VAR). The estimated results indicate the existence of bidirectional relationships between FDI and output, and between imports and output as well. The same bidirectional causal relationship exists also between FDI and imports. The results show that FDI affect human capital indirectly through gross domestic output, while, on the other hand, human capital affect FDI indirectly through domestic capital and imports. The results emphasize and support the FDI and import‐Led Growth Hypothesis for Jordan.