Foreign Direct Investment Inward and Outward; Evidence from Panel Data, Developed and Developing Economies, and Open and Closed Economies

Abstract

This paper examines empirically the association between Foreign Direct Investment inward and Foreign Direct Investment outward. Using a panel data set for 35 economies over the period 1981–2004 as well as the methodology of panel cointegration and panel causality tests, the empirical findings show that FDI inward does exhibit a significant relationship with FDI outward. Moreover, bi-directional panel causality is present when the sample is split into developed and developing economies. When the sample is split between open and closed economies the causality remains only for the open economies.