Abstract
This chapter investigates the relationship between Foreign Direct Investment (FDI) flows, gross capital formation (gross investment), national savings and GDP growth. The findings suggest that there is a negative relationship between real GDP growth and FDI, contrary to the proposition of the existing literature. Less developed financial systems and high inefficiency in the domestic economy results in misallocation of foreign capital in some instances. Investment and savings are important drivers for real GDP growth in the country. Efforts to increase national savings can also help capital formation, which is necessary for GDP growth.
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Notes
- 1.
See Chapter 5 on Economic Growth and Foreign Direct investment in transition Economies.
- 2.
See Fig. 69.
- 3.
See “From Third World to First” by Lee Kuan Yew (2000).
- 4.
Further details are provided in Chapters 1 and 2.
References
Dunning, J. (1994). Re-evaluating the benefits of foreign direct investment. Transnational Corporations, 3(1), 23–51.
Ghosh, A., & Ramakrishnon, U. (2006). Back to basics: Do current account deficits matter? Finance and Development, A Quarterly Magazine of the IMF, 43(4) http://www.imf.org/external/pubs/ft/fandd/2006/12/basics.htm.
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Haughton, A. (2017). Foreign Direct Investment, Savings, Investment and GDP Growth. In: Developing Sustainable Balance of Payments in Small Countries. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-53031-4_8
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DOI: https://doi.org/10.1007/978-3-319-53031-4_8
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