New evidence on the link between fdı and economic growth

Abstract

This paper explores the link between foreign capital inflows (FDI) and economic growth (GDP) while analyzing the moderating role of financial development in the period 1993-2015. The link of interest has been explored in the case of 75 countries (overall panel); 35 developed and 40 developing economies. The empirical methodology includes the GMM estimator. The empirical evidence suggests that FDI has a positive impact on GDP. Moreover, the coefficient with the financial development is found to be significant and positive. The policy implications of the general results of this paper point out that foreign capital inflow has appeared as the policy variable for accelerating economic growth in both, developed and developing countries.