International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Foreign Direct Investment and Gross Domestic Product: An Application on ECO Region (1995-2011)
Assist. Prof. Dr. Ali Rıza SANDALCILAR, Res. Assist. Ali ALTINER

Theoretical studies reveal that Foreign Direct Investments (FDI) have a positive impact on the growth in GDP of the host-country. This study puts forward whether the relationship between FDI inflow and GDP in the region of Economic Cooperation Organization (ECO) is coherent with the theoretical expectations. In this framework, the causal relationship between FDI inflow to the ECO region and GDP will be analyzed. The data of 1995-2011 periods is used in causality analysis covering ten ECO member countries. Granger Causality Test based on error correction model and Holtz-Eakin, Newey and Rosen Panel Causality Test are applied in analysis. According to the results of the causality tests, a strong positive causality from FDI to GDP and a slightly less positive causality from GDP to FDI in ECO region have been detected. Obtained results of the study comply with the theoretical expectations.

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