Relation of direct foreign investments and economic growth: panel data analysis on APEC countries

Abstract

Purpose- In this study, relation between direct foreign investments and economic growth had been analyzed for 11 APEC countries (Australia, Canada, Chile, China, Indonesia, Japan, Korea, Malaysia, Mexico, Russia and USA) in between era of 1990-2016 with the help of panel data analysis. Methodology- In this purpose, stability of variables had been searched by Im,Peseran and Shin Panel Unit Root Tests, Maddala and Wu Panel Unit Root Tests and Coi Panel Unit Root Tests to obtain unbiased predictions in study. Then, panel cointegration and causality tests had been applied. Findings- At the end of the research, it had been determined that existence of causality relation between series and there is unidirectional causality from direct foreign investments to economic growth. Conclusion- Although direct foreign investment in most of the developing countries is not directly linked to economic development, capital, technology and knowledge transfer which indirectly contributes. For this reason, developing countries are encouraging foreign direct investment.