Does foreign direct investment matter for economic growth in Asean countries?

Abstract

Does Foreign Direct Investment (FDI) stimulate economic growth of the host country? Empirical evidences have been mixed in the cases of developed, developing and transitional economies. There remain gaps in the literature. We strive to fll these gaps with an improved empirical study on the case of ASEAN countries. To do so, we employ a panel data set from 2001 to 2017. Then, we control for heterogeneity and rule out potential biases by constructing different models, the Fixed Effects Model, Random Effects Model, and Dynamic Panel Model, to obtain consistent estimations. The empirical results show that Foreign Direct Investment has had a positive impact on economic growth of ASEAN countries. It is a real relationship not a wishful thinking. The other determinant of economic growth is the Trade Openness. Some policy implications are also proposed in this research.