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Foreign direct investment and economic growth: the role of democracy


Ayub, Muhammad and Wan Ngah, Wan Azman Saini and Laila, Nisful and Mongid, Abdul and Wan Ismail, Wan Zulqurnain (2019) Foreign direct investment and economic growth: the role of democracy. International Journal of Economics and Management, 13 (2). pp. 481-493. ISSN 1823-836X; ESSN: 2600-9390


This study investigates the growth-effect of foreign direct investment (FDI) in 67 developing countries covering from 1984 to 2016, with a special emphasis on the role of democracy. The empirical results obtained from generalized method of moments (GMM) estimation demonstrate that democracy plays a crucial role in moderating the positive effect of FDI on output growth. The results are robust to several alternative measures of democracy and FDI. This suggests that the marginal effect of FDI on growth depends on the level of democracy such that countries which promote democratic institution benefit more from FDI inflows. The finding is consistent with the growing view that the growth-effect of FDI depends on other intervening factors in the host countries.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Publisher: Faculty of Economics and Management, Universiti Putra Malaysia
Keywords: Foreign direct investment; Democracy; Economic growth; Dynamic panel data analysis
Depositing User: Nabilah Mustapa
Date Deposited: 04 Feb 2020 08:47
Last Modified: 04 Feb 2020 08:47
URI: http://psasir.upm.edu.my/id/eprint/76503
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