Causal Interactions between FDI, and Economic Growth: Evidence from Dynamic Panel Co-integration

AbstractIn all countries, especially developing, foreign direct investment (FDI) plays a very important role, they are even considered as the engine of economic growth and development. Engaged in good conditions, foreign capital can help reduce the gap between capital requirements and national saving, raise skill levels in the host economy, improve market access and contribute to technology transfer and good governance. Foreign investment comes in many forms. In what follows, we will show through theoretical and empirical studies the effect of the investment on economic growth of countries.This study analyzes the relationship between foreign direct investment and economic growth in 65 countries, using co-integration and panel Granger causality tests in panel data. The results show a disparity in terms of the relationship between the co-integration of the panel study. The results also indicate a unidirectional causality from FDI to GDP, which could be a good tool to prioritize the allocation of resources across sectors to promote foreign direct investment