Volume 4, Issue 1, February 2015, Page: 1-10
An Empirical Analysis of Foreign Direct Investment and Economic Growth in Bangladesh
Shahjahan Ali, MSS student, Department of Economics, Begum Rokeya University, Rangpur, Bangladesh
Md. Rukunujjaman, MSS student, Department of Economics, Begum Rokeya University, Rangpur, Bangladesh
Khandaker Jahangir Alam, Assistant Professor, Department of Economics, Begum Rokeya University, Rangpur, Bangladesh
Received: Dec. 11, 2014;       Accepted: Dec. 18, 2014;       Published: Jan. 20, 2015
DOI: 10.11648/j.ijber.20150401.11      View  3349      Downloads  410
Abstract
Foreign Direct Investment (FDI) is assumed to benefit a poor country like Bangladesh, not only by supplementing domestic investment, but also in terms of employment creation, transfer of technology, increased domestic competition and other positive externalities. This paper focuses on the FDI-led growth hypothesis in the case of Bangladesh. The study is based on time series data from 1973 to 2013. The econometric framework of cointegration and error correction mechanism were used to capture two way linkages between variables interest. It is evident in the results that the regression analyses do not provide much support for the view of a robust link between FDI and growth in Bangladesh. It does not imply that FDI is insignificant. Rather, its analysis reduces the confidence in the belief that FDI has exerted an independent growth effect in Bangladesh. But net attitudes of the civil society on the impact of FDI on opportunities for domestic business and economic activities is positive and net attitudes of foreign firms toward FDI reveals that the investment climate has not improved in Bangladesh as a result of lack of good governance, corruption, political instability and disturbance, bureaucratic inertia, and poor low and order situation.
Keywords
Foreign Direct Investment, Economic Growth, Cointegration, Granger Causality, Bangladesh
To cite this article
Shahjahan Ali, Md. Rukunujjaman, Khandaker Jahangir Alam, An Empirical Analysis of Foreign Direct Investment and Economic Growth in Bangladesh, International Journal of Business and Economics Research. Vol. 4, No. 1, 2015, pp. 1-10. doi: 10.11648/j.ijber.20150401.11
Reference
[1]
Adams, S., 2009, Foreign direct investment, domestic investment and economic growth in Sub-Saharan Africa, Journal of Policy Modeling, 31: 939-949.
[2]
Agrawal, G. and A. Khan, 2011, Impact on FDI on GDP: A Comparative Study of China and India, International Journal of Business and Management, 6(10): 71-79.
[3]
Athukorala, P. and J. Menon (1996). “Foreign Investment and Industrialization in Malaysia: Exports, Employment and Spillovers”. Asian Economic Journal 10(1): 29-44.
[4]
Alam, M.S. and M. Zubayer, 2010. Intra Regional Foreign Direct Investment (FDI) Prospect in South Asian Association of Regional Cooperation (SAARC) Region, International Journal of Economics and Finance, 2: 3.
[5]
Azam, Muhammad (2010). “An Empirical Analysis of the Impacts of Exports and Foreign Direct Investment on Economic Growth in South Asia”. Interdisciplinary Journal of Contemporary Research Business, 2(7): 249-58.
[6]
Balasubramanyam, V.N., Salisu, M. and Sapsford, D. (1996) “Foreign Direct Investment and Growth in EP and IS Countries”. Economic Journal, 106: 92-105.
[7]
Blomstrom, M. and H. Perssion (1983). “Foreign Investment and Spillover Efficiency in an Underdeveloped Economy: Evidence from the Mexican Manufacturing Industry”. World Development 11: 493-501.
[8]
Braunstein, E. and Epstein G. (2002). “Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billons Consumers Tame the Multinationals?” CEPA Working Paper 2002/13. New York: Center for Economic Policy Analysis.
[9]
Borensztein, E., Gregorio, J.D. and Lee, J.W. (1998), “How Does Foreign Direct Investment Affect Economic Growth”? Journal of International Economics, 4: 115-35.
[10]
Caves, R.E. (1974). “Multinational Firms, Competition and Productivity in Host Country” Economica 41: 176-93.
[11]
Chang, Shu Chen (2007). “The Interactions among Foreign Direct Investment, Economic Growth, Degree of Openness and Unemployment in Taiwan,” Applied Economics 39: 1647-61.
[12]
Chen, C., Chang, L. and Zhang, Y. (1995), “The Role of Foreign Direct Investment in China’s Post 1978 Economic Development”. World Development 23: 691-703.
[13]
Chia, Siow Yue (1995). “The International Procurement and Sales Behavior of Multinational Enterprise”. In Corporate Links and Foreign Direct Investment in Asia and the Pacific, edited by Edward Chen and Peter Dry dale. NSW: Harper Educational.
[14]
De Gregorio, Jose. (2003), “The Role of Foreign Direct Investment and Natural Resources in Economic Development”. Working Paper No. 196. Central Bank of Chile, Santiago.
[15]
Dickey, D. A., Jansen, D. W. and Thornton, D. C. (1991). “A Primer on Cointegration with An Application to Money and Income”, Review Federal Reserve Bank of ST. Louis, 73 (2), 58-78.
[16]
Globerman, S., (1979). “Foreign Direct Investment and ‘Spillover’ Efficiency Benefits in Canadian Manufacturing Industries”. Canadian Journal of Economics 12: 42-56.
[17]
Granger, C. W, J. (1980) Long memory relationships and the aggregation of dynamic models. Journal of Econometrics. 14, 227-38.
[18]
Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 35, 424–438.
[19]
Granger, C.W. J., 1981. Some properties of time series data and their use in econometric model specification. Journal of Econometrics 16, 121-30.
[20]
Hassan and Kalim, 2012. The Triangular Causality among Education, Health and Economic Growth: A Time Series Analysis of Pakistan Muhammad Shahid Hassan and Rukhsana Kalim World Applied Sciences Journal, 18(2): 196-207.
[21]
Hoang, Thi Thu, Wiboonchutikula Paitoon and Tubtimtong Bangorn. (2010). “Does Foreign Direct Investment Promote Economic Growth in Vietnam?” Asean Economic Bulletin, 27(3): 295-311.
[22]
Hymer, S., (1972). “The MNC and the Law of Uneven Development” in J.N. Bhagwati (ed), Economics and World Order, New York: MacMillan.
[23]
Johansen, S., 1988. Statistical analysis of cointegration vectors, Journal of Economic Dynamics and Control, 12: 231-54.
[24]
Johansen, S., 1991. Estimation and hypothesis testing of cointegration vectors in Gaussian vector on Economic autoregression models, Econometrica, 59: 1551-80.
[25]
Kim, D.D. and Seo, J.S. (2003). “Does FDI Inflow Crowd Out Domestic Investment in Korea”. Journal of Economic Studies 30 (6): 605-22.
[26]
Lahiri, S. and Ono, Y. (1998). “Foreign Direct Investment, Local Content Requirement and Profit Taxation”.Economic Journal 108: 444-57.
[27]
Lyold, P. (1996), “The Role of Foreign Investment in the Success of Asian Industrialization”. The China Quarterly 144: 1065-82.
[28]
Mallick, Sushanta and Tomroe Moore (2008). “Foreign Capital in a Growth Model” Review of Development Economics 12: 143-59.
[29]
Perron, P., 1991. Testing Consistency with Varying Sampling Frequency. Econometric Theory 7, 341-68
[30]
Ramirez, Miguel D (2000). “Foreign Direct Investment in Mexico: A Cointegration Analysis, “Journal of Development Studies 37: 138-62.
[31]
Wang, J. and Blomstrom, M. (1992). “Foreign Direct Investment and Technology Transfer: A Simple Model”, European Economic Review 36: 137-55.
[32]
Xiao, Qin Fan and Paul M. Dickie (2000). “The Contribution of Foreign Direct Investment to Growth and Stability”. ASEAN Economic Bulletin 17(3): 312-23.
[33]
Zhang, Kevin Honglin (2001). “Does Foreign Direct Investment Promote Economic Growth? Evidence from East Asia and Latin America”. Contemporary Economic Policy 19: 175-85.
Browse journals by subject