Foreign direct investment and economic growth - an empirical study on Bangladesh economy

Abstract

The relationship between foreign direct investment (FDI) and economic growth (GDP) has gained intensive attention for empirical studies. This study is an effort to investigate the FDI led economic growth hypothesis for Bangladesh considering the period 1980-2012 using a vector error correction model (VECM). The objective of this study is to examine the existence of long-run relationship between FDI and GDP applying the Johansen cointegration analysis taking into account the maximum eigenvalues and trace statistics, keeping in mind the FDI led growth doctrine. The results suggest that FDI leaves a positive effect on economic growth in the long-run in the Bangladesh economy.