FOREIGN DIRECT INVESTMENT, TRADE AND ECONOMIC GROWTH: A COMPARISON OF SELECTED SOUTH ASIAN COUNTRIES

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1 Inernaional Journal of Humaniies and Social Science Vol. 2 No. 5; March 2012 FOREIGN DIRECT INVESTMENT, TRADE AND ECONOMIC GROWTH: A COMPARISON OF SELECTED SOUTH ASIAN COUNTRIES Khalid Javed Graduae Suden Deparmen of Economics Universiy of Sargodha Pakisan Falak sher Deparmen of Economics Universiy of Sargodha Pakisan Rehma Ullah Awan Deparmen of Economics Universiy of Sargodha Pakisan Muhammad Ashfaq Deparmen of Economics Quaid-e-Azam Universiy Islamabad Pakisan Absrac The presen sudy esimaes link among Foreign Direc Invesmen (FDI), Trade and Economic Growh in four Souh Asian economies namely, India, Bangladesh, Sri Lanka and Pakisan using daa from 1973 o The sudy employs Generalized Mehod of Momens (GMM). Resuls indicae ha FDI has mixed impacs on oupu expansion in differen counries, while Expors have posiive impac upon oupu growh in all counries. Domesic Invesmen (DI) and Labor force (LF) have also posiive impac upon Growh. Sum of boh of he coefficiens is less han one which exhibis decreasing reurns o scale in all he counries. Key words: FDI, GDP, DI, LF, GMM, FDI-LED GROWTH, DI-LED GROWTH. 1. INTRODUCTION Souh Asian counries experienced a large increase o inward FDI flows in 1990s coupled wih he speedy globalizaion of producion in developing counries (Chakrabory & Basu, 2002). Domesic invesmen is replaced or complemened by FDI and he laer can also have exra burden on curren accoun balance a leas in he shor run. The connecion beween capial inflows and growh derived from producion funcions (PF) have been analyzed by differen sudies, using ime series daa. The figh and efficiency in home markes is increased and superior echnology and managemen mehods are inroduced by he FDI inflows. To accelerae economic growh, a more liberal policy owards FDI was adoped by many developing counries since he mid 1980,s. In paricular invoirmen, FDI does no accelerae growh (Romeo 1980). Macro level analysis by uilizing FDI inflows for differen counries, normally advocae a helpful funcion of FDI on growh (Borenszein e al 1995). Economic growh is boosed by FDI in he neoclassical perspecive hrough addiion in level of invesmen or is effecive use (Solow 1956). FDI is comprises capial and echnology and hus increase he curren level of knowledge (DE Mello 1999). FDI is more helpful for hose economies where expor promoion insead of impor subsiuion sraegies were adoped (Balasubramanyan e al 1996). The impac of globalizaion on GDP growh is significan bu i affecs FDI flows negaively. Boh GDP growh and FDI are posiively affeced by domesic invesmen and negaively by governmen expendiures (Hassan 2005). Pakisan and oher counries in Souh Asia open doors o FDI like oher underdeveloped counries. 210

2 Cenre for Promoing Ideas, USA However, hese counries excep India are no as successful as china in receiving significan and reliable FDI inflows. Moreover, he small inflows hese counries received have no been uilized properly o increase he growh (Le and Aaullah 2006). FDI inflows are persisenly low enough and economic reforms are believed o be responsible for aleraion in naure and ype of FDI (Chakrabory and Nunnenkamp 2008). For growh he forms and srucural composiion of FDI play a much role. Some quesions need answers based on empirical analysis like, wha is he conribuion of FDI in achieving growh arges in seleced Souh Asian counries, paricularly; does FDI significanly conribue o economic growh? Does rade affec he pace of economic growh? The word seleced is used for Souh Asian counries due o arising difficulies regarding daa of he small counries namely Bhuan, Maldives, and Nepal. However, analysis is conduced for four counries namely Pakisan, India, Bangladesh and Sri Lanka. These four counries are also par of Souh Asian Associaion for Regional Cooperaion (SAARC) agreemen aiming a promoion of regional rade wih leas barriers o promoe welfare of he people of he region. The remainder par of he sudy is organized as follows: Secion 2describes review of lieraure. Secion 3 explains concepual framework. Mehodology and daa issues are given in Secion 4. Resuls are described in secion 5 and las secion presens conclusions and policy suggesions. 2. LITERATURE REVIEW The issue of FDI, Trade and Economic Growh has been addressed boh heoreically and empirically. Lieraure on FDI relaed issues is of wo ypes. On one side, is he growh heory, having FDI as one of he regressors and describing oupu growh (Balasubramanyam e al 1996; Borenszein e al 1995). Technology ransfers implici in FDI are ransmied o local firms by mulinaionals firms. Foreign invesmens boos he produciviy of all he firms in he recipien economy (Rappapor 2000). Developing counries benefi from hese spillovers only if hey have proper skilled workforce (Nelson and Phelps (1966). This consideraion leads o FDI-led growh heory. Conrary o he belief described above, in growh-driven FDI heory, chances for higher rewards in he hos naion are a source of aracion for FDI. According o his heory, here is capial inflow in he form of FDI o fill he excess demand ha exiss in he home counry as a resul of economic growh (Markusen 1995). As a resul FDI is araced due o he exisence of invesmen friendly amosphere and higher raes of profis in he desinaion counry. Many sudies show ha economic growh of recipien counry has posiive effec on FDI inflow (Veugelers, 1991; Grosse and Trevino, 1996). FDI has posiive impac upon growh (Dunning, 1993; Ericsson and Irandous, 2000; Trevino and Upadhyaya, 2003) and in some cases, i has negaive effec on growh oo (Moran, 1998). Posiive effec of FDI on economic growh occurs when FDI comes ino markes, while negaive effecs occurs when FDI comes ino proeced indusries (Encarnaion and Wells, 1986). I is generally believed ha no he smaller raher he greaer par of domesic invesmen is subsiued by FDI. However, posiive relaionship beween FDI and DI is greaer as compare o ha beween DI and foreign porfolio invesmen (Bosworh and Collins, 1999). In order o arac FDI, wages, educaion level, ax laws, and poliical and macroeconomic condiions of counry in addiion o marke size play an imporan role. Corporae axes have negaive (Hsiao, 2001) while infrasrucure, impor ariffs, poliical and macroeconomic sabiliy generally have posiive impac upon FDI inflows (Mallampally and Sauvan, 1999; Biswas, 2002). The presen sudy follows he imporan sudy by Borenszein e al (1995) ha invesigaes he impac of FDI on growh using cross-secional daa finds ha FDI is a deerminan of growh if a naion is capable of absorpion of modern echnology. GDP growh raes,ne inflows and FDI as % of GDP in four Souh Asian counries are shown in Table 1, 2 and 3. I is eviden from he ables ha GDP growh raes are no he same in four Souh Asian counries. GDP growh rae in Bangladesh is almos sable in he recen years i.e. in he range of 6% and 6.1 in he years 2009 and 2010, respecively. India has he highes growh rae in he region and he same is 9% is and 8.8% in he years 2009 and 2010, respecively. The GDP growh rae in Pakisan is no sable over he period and same varied beween 1.6% o 7.7% from 2005 o 2009 and 4.1% in Sri Lanka has almos susained GDP growh rae of almos 6% in recen years from 2005 and onward wih 8.0% in 2010.The rends shows ha ne inflows of FDI decline in he las four years in hese Souh Asian Counries. The share of FDI in GDP has declined from 2.6 %( 2009) o 1.4% (2010) in India and 1.4 %( 2009) o 1.1 %( 2010) in Pakisan. The share of FDI in GDP in 2009 in wo oher Souh Asian counries i.e. Bangladesh and Sri Lanka remains as 0.79% and 1%, respecively and 0.96% and 1% in

3 Inernaional Journal of Humaniies and Social Science Vol. 2 No. 5; March 2012 As far as ne inflows of FDI are concerned, i declined from $ (2009) o $ (2010) in India and $2338(2009) o $2016(2010) in Pakisan. FDI ne inflows increased in Bangladesh from $713.4(2009) o $967.6(2010) and he same declined in Sri Lanka from $404(2009) o $478.2(2010). Table.1 GDP Growh Rae Years Bangladesh India Pakisan Sri Lanka (Source 2011) Table.2 FDI as % of GDP Years Bangladesh India Pakisan Sri Lanka (Source 2011) 212

4 Cenre for Promoing Ideas, USA Table.3 FDI Ne Inflows (BoP, Curren US$) Years Bangladesh India Pakisan Sri Lanka (Source 2011) Summary saisics of he variables: GDP, FDI, Expors, Impors and Domesics invesmen is presened in Tables: 4, 5, 6 &7. Table.4 Summary Saisics for Bangladesh GDP FDI Expors Impors DI LF Mean Median Maximum Minimum Sd.Dev Skewness Kurosis Jarque-Bera Probabiliy (Auhors calculaion ) Table.5 Summary Saisics for India GDP FDI Expors Impors DI LF Mean Median Maximum Minimum Sd.Dev Skewness Kurosis Jarque-Bera Probabiliy (Auhors calculaion ) 213

5 Inernaional Journal of Humaniies and Social Science Vol. 2 No. 5; March 2012 Table.6 Summary Saisics for Pakisan GDP FDI Expors Impors DI LF Mean Median Maximum Minimum Sd.Dev Skewness Kurosis Jarque-Bera Probabiliy (Auhors calculaion ) Table.7 Summary Saisics for Sri Lanka GDP FDI Expors Impors DI LF Mean Median Maximum Minimum Sd.Dev Skewness Kurosis Jarque-Bera Probabiliy (Auhors calculaion ) The growh raes of GDP for he four Souh Asian counries are shown in Figure 1. As i is apparen from he figure, GDP growh raes in four Souh Asian counries vary over he period of 1980 o Figure.1 GDP Growh Raes of Souh Asian Counries in Sri Lanka CONCEPTUAL FRAMEWORK The Cobb-Douglas producion funcion in is sochasic form may be expressed as follows: 2 3 u Y L K e (1) Where Y, L, K are: oupu, capial and labor, respecively. µ is sochasic disurbance erm, and e is base of naural logarihm. The nonlinear relaionship beween oupu and he wo inpus can be log-ransformed as under: ln Y ln ln L ln K ln Y ln L ln K (2) 214 Ban PAK IND SRI

6 Cenre for Promoing Ideas, USA Where 1 ln Equaion (2) is a log-linear model, where 2 is he parial elasiciy of oupu wih respec o he labor inpu; 3 is he parial capial elasiciy of oupu and he sum of ( 2+ 3) represens reurns o scale. Thus, he general form of equaion 2 wih a k-variable log-linear model can be wrien as: ln Y ln L ln K... k ln X k (3) where X k is a se of oher variables oher han labor and capial. Spliing sock of capial ino domesic and foreign, equaion (2) can be re-wrien as: ln Y ln L ln K 4 (4) where FDI represens foreign capial. Following Bagwai (1978), impors and expors are included as separae variables in equaion in order o allow for he balance of paymens effecs. Thus equaion (4) can be wrien as: ln Y ln L ln K 4 5 ln X 6M (5) where, X represens he expors, and M represens he impors. Equaion (5) is assumed o deermine he poenial level of oupu when all facors of producion are fully uilized. However, he realized oupu may deviae from is poenial level because of echnology inefficiency and adjusmen coss. Assuming linear parial adjusmen mechanism, lag of dependen variable Y is added resuling in following equaion: ln Y ln L ln K 4 5 ln X 6M ln 7Y 1 (6) Finally, by inroducing dummy variable o represen srucural shif or period of liberalizaion wih expeced negaive coefficien, equaion (6) can be wrien as: ln Y ln L ln K 4 5 ln X 6M ln 7Y 1 8D (7) Where D = 1for he period of 1990 s & 2000 s and 0 oherwise. 3.1 DETERMINANTS OF FDI Following Li and Xiaming (2005), he deerminans of FDI can be wrien as: 1 2 ln Y 3 ln DI 4 ln open 5D 6FDI 1 (8) Where open is rade openness. 3.2 DETERMINANTS OF EXPORTS AND IMPORTS Following Sharma (2000), deerminans of expors and impors are shown by he following equaions: ln X 1 2 ln Y 3 ln DI 4 5 ln RER 6D 7X 1 (9) ln M ln Y ln DI 4 5 ln RER 6D 7M 1 (10) Where RER is he real exchange rae. 4. DATA AND METHODOGY The Generalized Mehod of Momens (GMM) is a generalized form of he classical Mehod of Momen (MM). The sudy uses GMM, developed by Holz-Eakin, and Rosen (1990). In his sudy, insrumens for endogenous regressors as proxy are used due o he fac ha he endogenous regressors have correlaion wih he error erms of he equaion in which hey appear as regressors. So hese insrumens have zero correlaion wih he disurbance erms in equaion. Consider esimaion of he parameers of equaion sysem: Y 1 h1 (, X ) 1 Y 2 h2 (, X ) 2.. Y h (, X ) m m m 215

7 Inernaional Journal of Humaniies and Social Science Vol. 2 No. 5; March Non-zero correlaion beween X iand is. is allowed in general formulaion of he above model. A se of insrumenal variables Z is as follows: E z i = 0, 1... T and i 1... M Zero correlaion beween Z and is allowed (Greene, W., H.) i The empirical resuls are based on ime series daa covering he period for he following variables: GDP, Expors (X), Impors (M), FDI (Ne Inflows) and DI (Gross fixed Capial Formaion) among ohers bu some values fills by aking average of wo neares figures.. All hese variables are in million US dollars on consan prices of year 2000 and in logarihm form. Trade openness is measured as: [(X+M)/ GDP)]. Real rae of ineres (IR) is calculaed as nominal ineres rae minus inflaion (growh of Consumer Price Index) of respecive counry. Real exchange rae (RER) is he produc of nominal exchange rae (local currency per dollar) and CPI of he Unied Saes and hen dividing his produc by GDP deflaor of he respecive counry. The daa on exchange rae and ineres rae are exraced from Inernaional Financial Saisics (IFS) and daa on all oher variables, from World Developmen Indicaor ().Variables and heir definiions are presened in Table. 8 Table.8 Variables and Daa Sources Variable Definiion Daa Source World Log of GDP Real GDP Developmen indicaor Log Labor Force Log Foreign Direc Invesmen Trade openness Log of Domesic Invesmen Log of Expors Log of Impors Exchange Rae Toal labor force I is he sum of equiy capial, reinvesmen of earnings, oher long erm capial, and shor erm capial as shown in Balance of Paymens Sum of expors and impors as raio of GDP. Fixed capial formaion Real Expors Real Impors Real exchange raes 5. EMPIRICAL RESULTS OF SIMULTANEOUS EQUATION MODEL Saionariy of he included series have been checked using Philips Perron (1988) and all he series are found o be inegraed of I (1). The resuls are presened in ables: 9, 10, 11 and 12. Table.9 Resuls for uni roo a level & 1 s difference Bangladesh IFS 216 Variables PP a level (inercep & linear rend) Inegraion PP a 1s difference (inercep & linear rend) Inegraion LEXP I(0) I(1) LFDI I(0) I(1) LGDP I(0) I(1) LIMP I(0) I(1) LDI I(0) I(1) Criical value is , and a 1%, 5% and 10% respecively level of significance

8 Cenre for Promoing Ideas, USA Variables Table.10 Resuls for uni roo a level & 1 s difference India PP a level (inercep & linear rend) Inegraion PP a 1s difference (inercep & linear rend) LEXP I(0) I(1) LFDI I(0) I(1) LGDP I(0) I(1) LIMP I(0) I(1) LDI I(0) I(1) Inegraion Criical value is , and a 1%, 5% and 10% respecively level of significance Variables Table.11 Resuls for uni roo a level & 1 s difference Pakisan PP a level (inercep & linear rend) Inegraion PP a 1s difference (inercep & linear rend) LEXP I(0) I(1) LFDI I(0) I(1) LGDP I(0) I(1) LIMP I(0) I(1) LDI I(0) I(1) Inegraion Criical value is , and a 1%, 5% and 10% respecively level of significance Table.12 Resuls for uni roo a level & 1 s difference Sri Lanka Variables PP a level (inercep & linear rend) Inegraion PP a 1s difference (inercep & linear rend) LEXP I(0) I(1) LFDI I(0) I(1) LGDP I(0) I(1) LIMP I(0) I(1) LDI I(0) I(1) Inegraion Criical value is , and a 1%, 5% and 10% respecively level of significance Variables in he analysis are checked Equaions 7 o 10 are idenified and esimaed value of R² is large in all counries are presened in Tables: 13 o 16. Esimaion of oupu equaion (Equaion 7) yields ha FDI is negaively relaed o real oupu in case in all he counries (same as Xu, 2000; Durham 200). Resuls also show ha 1% increase in DI will increase he real oupu by 0.29%, 1.02%, and 0.29 % in Bangladesh, India and Sri Lanka respecively bu -0.05% decrease in Pakisan. Expors have posiive impac on real oupu in Pakisan and Sri Lanka bu i is significan only in Pakisan. Expors have negaive and significan impac on real oupu in India and Bangladesh. Impors have posiive and significan effec in all counries excep India. The regression coefficien of liberalizaion dummy is posiive in wo counries i.e., Sri Lanka and India, suggesing ha level of real GDP during 1990 s and 2000 s was significanly higher han he period before his and negaive in case of i.e., The coefficien of lagged dependen variable is posiive and significan in India and Pakisan indicaing posiive associaion beween curren and previous year s oupu bu posiive and insignifican in Bangladesh Resuls of FDI equaion (Equaion 8) show ha he regression coefficien of liberalizaion dummy is posiive in all counries bu significan in Bangladesh and Sri Lanka indicaing ha level of FDI during 1990 s and 2000 s was insignificanly higher han he level during earlier years. There is posiive and significan relaionship beween FDI and rade openness in all counries bu significan only in India. Finally he curren level of FDI is posiively and significanly relaed o FDI in he previous year in all counries. GDP has posiive and significan impac on FDI in all counries excep Sri Lanka. 217

9 Inernaional Journal of Humaniies and Social Science Vol. 2 No. 5; March 2012 Resuls of Equaion 9 show ha coefficien of liberalizaion dummy is posiive and significan in all he counries Pakisan excep Bangladesh where i is insignifican. FDI is posiively and significanly relaed o expors in Bangladesh and India. The effec of real exchange rae on expors is posiive and insignifican in Bangladesh bu negaive in oher hree counries. Real GDP has posiive and significan effec on expor in all counries. Finally, he resuls of expors equaion show significan ineria as indicaed by he saisical significance of coefficiens of lagged dependen variables in all counries. Resuls of Impors equaion (Equaion 10) show a negaive and insignifican value of liberalizaion dummy in all counries excep India. FDI is posiively and significanly relaed o impors in all counries of he sample. The effec of real exchange rae on impors is negaive and insignifican in Pakisan and Sri Lanka bu significan in Pakisan. However, he same effec is posiive and insignifican in Bangladesh and India. Real GDP has posiive and significan effec on impors in all counries. Finally, he resuls of impors equaion show significan ineria Ind.Var Table.13 (GMM) Esimaion Resuls GDP Dep. Var. Bangladesh India Pakisan Sri Lanka Log Real GDP Log Real GDP Log Real GDP Noe: (-values are in parenheses). *Significance a 1% level of significance. ** Significance a 5% level of significance. *** Significance a 10% level of significance. Table.14 (GMM) Esimaion Resuls FDI Log Real GDP Log Labor Force (0.70) (-0.75) (-0.18) (3.20) Log DI (2.85)* (3.51) (-0.68) (4.25)* Log FDI (-4.95)* (-5.51)* (-2.98)* (-6.13)** Log Expor (-2.40) (-1.77) (3.75)* (1.19)* Log Impor (2.39)* (-2.04)** (3.70)* (4.56)* Dummy (-0.98) (2.88)* (3.77) Lag Dependen (0.93) (0.06)* (1.87)*** R-SQUARED Bangladesh India Pakisan Sri Lanka Dep. Ind.Var Var. Log FDI Log FDI Log FDI Log FDI 218 Log Real GDP (3.74)* (1.66)*** (6.30)* (1.55) Openness (1.28) (2.96)* (1.55) Log DI (-3.41)* (-1.55) (2.11)** Dummy (3.54)* ( 0.77) (1.03) (-1.65)*** Lag Dependen (2.78)* (5.91)* (6.01)* (14.94)* R-SQUARED Noe: (-values are in parenheses). *Significance a 1% level of significance. ** Significance a 5% level of significance. *** Significance a 10% level of significance.

10 Cenre for Promoing Ideas, USA Table.15 (GMM) Esimaion Resuls Expors Dep. Ind.Var Var. Log Expor Bangladesh India Pakisan Sri Lanka Log Expor Log Expor Log Expor Log Real GDP * 0.24 (2.11)** (2.59)* (2.38) (2.02) Log DI (-0.44) (- 2.61)* (-0.33) (0.24) Log FDI (1.61) (2.73)* Log RER (0.50) (-0.87) (-3.37) (-1.66)*** Dummy (1.18) (1.62) (4.02) (1.82)*** Lag Dependen (8.45)* (6.69)* (3.05)* (14.69)* R-SQUARED Noe: (-values are in parenheses). *Significance a 1% level of significance. ** Significance a 5% level of significance. *** Significance a 10% level of significance. Table 16 (GMM) Esimaion Resuls Impors Bangladesh India Pakisan Sri Lanka Ind.Var. Dep. Var. Log Impors Log Impors Log Impors Log Impors Log Real GDP (6.22)* (4.48)* (3.23)* (1.91)*** Log FDI (3.47)* (4.49)* (1.84)** (1.51) Log RER (0.28) (0.45) (-3.27)* (-1.53) Dummy (-0.99) (-0.47) (-0.57) (-2.45)* Lag Dependen (5.22)* (3.18*) (3.74)* (5.56)* R-SQUARED Noe: (-values are in parenheses). *Significance a 1% level of significance. ** Significance a 5% level of significance. *** Significance a 10% level of significance. 6. CONCLUSION AND POLICY IMPLICATIONS: By esing differen hypoheses o check he associaion among FDI, Trade and Growh and comparing FDI-led growh and Expor-led growh, i is concluded ha FDI has posiive effec on growh in all he counries excep Sri Lanka while expors have posiive impac upon oupu in all he naions. Impors have posiive and significan impac on oupu only in Pakisan and Sri Lanka. Boh labor force and domesic invesmen have posiive effec on growh and he sum of he coefficiens of boh hese variables is less han one in all he counries, indicaing decreasing reurns o scale in all he counries. Openness is saisically significan, suggesing ha he more open he economy, he more simulus i has on FDI in shor run. The regression coefficiens of liberalizaion dummy have differen signs and magniudes, suggesing varying effec of liberalizaion on differen variables in sample economies. 219

11 Inernaional Journal of Humaniies and Social Science Vol. 2 No. 5; March 2012 As a policy measure, i is suggesed ha FDI is he mos imporan variable among ohers ha should be argeed in order o enhance growh. To reap fruis of spillover effecs of FDI and growh, he former should be araced hrough improvemens in economic, poliical and social amosphere in a counry, as a par of policy measures. REFRENCES Balasubramanyan,V. (1996). FDI and Growh in EP and IS counries. The Economic Journal. 106(4), Biswas, R. (2002). Deerminans of foreign direc invesmen. Review of Developmen Economics, 6 (3), Borenszein, E., Gregorio, J. & J. Lee (1995). How does foreign direc invesmen affec economic growh? Journal of Inernaional Economics, 45 (1), Bosworh, B., P. & S., Collins, M. (1999). Capial flows o developing economies: Implicaions for saving and invesmen. Brookings Papers on Economic Aciviy, 1, Chakrabory, C. &P. Basu (2002). Foreign Direc Invesmen and Growh in India: A Coinegraion Approach. Applied Economics 34: Chakrabory, C. & Nunnenkamp, P. (2008). Economic Reforms, FDI, and Economic Growh in India: A Secor Level Analysis. World Developmen. 36(7), Demello, L.,R. (1999). Foreign Domesic Invesmen-Led Growh: Evidence from Time Series and Panel daa. Oxford Economic Papers, 51, Durham, J, B. (2004). Absorpive Capaciy and he effecs of Foreign Direc Invesmen and equiy foreign Porfolio invesmen on Eco Growh. European Economic Review; 48, Encarnaion D. J. & Wells, L. T., (1986). Evaluaing foreign invesmen. In T. H. Moran e al. Invesing in developmen: new roles for foreign capial? Washingon, DC: Overseas Developmen Council. Ericsson, J. & Irandous. M. (2000). On he causaliy beween foreign direc invesmen and oupu: A comparaive sudy. Inernaional Trade Journal, 15, Green, W.H. (2004). Economeric Analysis Fourh Ediion, New York: Macmillan. Grosse, R. & Trevino, L., J. (1996). Foreign direc invesmen in he Unied Saes: An analysis by counry of origin. Journal of Inernaional Business Sudies, 27, Hassan, M., K. (2005). FDI, Informaion Technology and Economic Growh in he MENA Region. 10h ERF paper Universiy of New Orleans. Holz-Eakin e al (1990). Esimaing VAR wih Panel Daa. Economerica. 56, Hsiao, C. (2001). Efficien esimaion of dynamic panel daa models wih an applicaion o he analysis of foreign direc invesmen in developing counries. Paper presened a he 2001 Far Easern Economeric Sociey Meeing, Kobe, Japan. Inernaional Moneary Fund (2006). Inernaional Finanional Saisics (IFS). Lee, M., H. & Aaullah, A. (2006). Foreign Capial and Economic Performance of Pakisan. The Lahore Journal of Economics. 7(1), Li, X., & Xiaming, I. (2005). FDI and Economic Growh: An increasing Endogenous growh Relaionship. World Developmen, 33(3), Nelson, R. & Phelps, E. (1966). Invesmen in Humans, Technological Diffusion and Economic Growh. American economic Review, 51, Phillips, P. & Perron, P. (1988). Tesing for a uni roo in ime series regression. Biomerika, 75, Rapparo, J. (2000). How does openness o Capial Flows Affec growh? Mimeo, Federal Reserve Bank of Kansas Ciies, (June). Sharma K. (2000). Expor Growh in India: Has FDI Played a role? hp:// Solow, R. (1956). A conribuion o he heory of economic Growh. Quarerly Journal of Economics, 70, World Bank (2010). World Developmen Indicaor. Washingon D.C (USA) Xu, B. (2000). Mulinaional Enerprises, Technology Diffusion, and Hos Counry Producive Growh. Journal of Developmen Economics, 62, Mallampally, P. and K. P. Sauvan (1999) Foreign direc invesmen in developing counries, Finance and Developmen, 36 (1), p. 36. Markusen, J. (1995). The Boundaries of inernaional Enerprises and Theory of Inernaional Trade. Journal of Inernaional perspecives, 9, Trevino, L., J. & Upadhyaya, K., P. (2003). Foreign aid, FDI and economic growh: Evidence from Asian counries. Transnaional Corporaions, 12 (2), Veugelers, R. (1991). Locaional deerminans and rankings of hos counries: An empirical assessmen. Kyklos, 44 (3),