Nexus between Foreign Direct Investment (FDI) and Economic Growth (EG): A study of 10 Countries of the World (2018 - 2022)

Abstract

Developing and world economies have at some point, since the birth of commerce, witnessed either of the departure or influx of Multinational Enterprises (MNEs). And to gain greater research insight if change in Foreign Direct Investments (FDI) impact on countries’ Economic Growth (EG), this research aimed to examine, with a more recent quantitative data (2018 - 2022), for any statistical nexus between FDI and EG – measured with the macro-economic index of Gross Domestic Product (GDP). In achieving this, the study deployed Ex-Post Facto research design, with data retrieved from the 2023 published United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report; and World Bank National Accounts data, and OECD National Accounts Data files. Formulated hypothesis was tested with the Bivariate Pearson Product-moment Correlation Coefficient statistics, and its’ result was further validated by Bayes Factor Inference on Correlations statistics. The study found that a statistically significant and positive long-term relationship existed for all of the 10 countries of the world selected as case. Thereby concluding that FDI is indeed a key indicator that impacts EG of any country. Sequel to the findings and conclusion, this study recommends to policy-makers – particularly of developing economies, among others, the institution of flexible economic policies, attractive tax incentives, friendly business legislations, and economic and political stability measures; and the further development of their infrastructures so as attract greater MNEs.