Foreign Direct Investment: Flows, Volatility, and the Impact on Growth

16 Pages Posted: 28 Jun 2006

See all articles by Robert Lensink

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance; Wageningen UR - Development Economics Group

Oliver Morrissey

University of Nottingham - Development Economics

Abstract

This paper contributes to the literature on FDI and economic growth. We deviate from previous studies by introducing measures of the volatility of FDI inflows. As introduced into the model, these are predicted to have a negative effect on growth. We estimate the standard model using cross-section, panel data, and instrumental variable techniques. Whilst all results are not entirely robust, there is a consistent finding that volatility of FDI has a negative impact on growth. The evidence for a positive effect of FDI levels on growth is not robust, nor is that for any effect of human capital.

Suggested Citation

Lensink, Robert and Morrissey, Oliver, Foreign Direct Investment: Flows, Volatility, and the Impact on Growth. Review of International Economics, Vol. 14, No. 3, pp. 478-493, August 2006, Available at SSRN: https://ssrn.com/abstract=912579 or http://dx.doi.org/10.1111/j.1467-9396.2006.00632.x

Robert Lensink (Contact Author)

University of Groningen - Department of Economics, Econometrics and Finance ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Wageningen UR - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Oliver Morrissey

University of Nottingham - Development Economics ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 (0)115 9515475 (Phone)
+44 (0)115 951 4159 (Fax)

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