Re-Examining Growth in the EU :FDI-led or Export-led?
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In this study, we test an important policy question, whether or how FDI or export induces economic growth. Our study differs from other studies in two aspects. One is the use of a rich panel data which covers EU15’s 1970-2009 period to test the impact of FDI on economic growth. The other is an attempt to additionally test whether the EU enlargement process account for GDP growth. We estimate several specifications using our panel data, such as fixed effect and instrumental variable estimations, and test whether an increase in FDI, export or both increase induces a corresponding increase in GDP and, if it does, how much it does. According to our regression results, an increase of either FDI or export does lead to an increase in GDP, but the income growth is not elastic with respect to FDI and export. In our data, Granger causality test significantly reject that FDI do not Granger cause GDP.
Abstract
In this study, we test an important policy question, whether or how FDI or export induces economic growth. Our study differs from other studies in two aspects. One is the use of a rich panel data which covers EU15’s 1970-2009 period to test the impact of FDI on economic growth. The other is an attempt to additionally test whether the EU enlargement process account for GDP growth. We estimate several specifications using our panel data, such as fixed effect and instrumental variable estimations, and test whether an increase in FDI, export or both increase induces a corresponding increase in GDP and, if it does, how much it does. According to our regression results, an increase of either FDI or export does lead to an increase in GDP, but the income growth is not elastic with respect to FDI and export. In our data, Granger causality test significantly reject that FDI do not Granger cause GDP.
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