The Causality of Foreign Direct Investment and Its Effects on Economic Growth: Re-estimated by a Directed Graph Approach

Abstract

This paper uses the directed acyclic graph approach to analyze the causal patterns among foreign direct investment and other economic, social, and political variables, including GDP per capita as a proxy for economic growth. We find that economic growth causes FDI inflows for developing countries, while FDI induces economic growth for developed countries. Also, stock market is found to be an intermediary that amplifies the influence on FDI from many causal variables of FDI.FDI, economic growth, DAG, Financial Economics,