Endogenous Determination of FDI Growth and Economic Growth:The OECD Case



Working Paper # 08/07

Abstract

This paper tests the endogenous relationship between FDI growth and economic growth using
a panel dataset for 23 OECD countries for the period 1975-2004. In particular we estimate a
two-equation simultaneous equation system with the generalized methods of moments
(GMM) that treats economic growth and FDI growth as endogenous variables. We find that
FDI growth and economic growth are significant determinants of each other. We also find
that export growth rate and human capital are statistically significant determinants of both
FDI growth and economic growth. Our findings lead us to conclude that FDI growth and
economic growth have an endogenous relationship.

Keywords: FDI growth, economic growth, Panel Data, GMM
JEL Classification: C33, O5, F21.

Burcu TÜRKCAN1

Izmir University of Economics

Research Assistant

Sakarya Cad. No:156 Balçova/Izmir - TURKEY

[email protected]

I. Hakan YETKiNER

Izmir University of Economics

Assoc. Prof. Dr.

Sakarya Cad. No:156 Balçova/Izmir - TURKEY

Hakan.Y [email protected]

t Corresponding Author.



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