Foreign Direct Investment, exports and economic growth in the three little dragons: Evidence from cointegration and causality tests

Abstract

Although exports-growth relationships in the NIEs have been studied rather extensively, the causal connections between foreign direct investment (FDI) and growth have not yet been fully explored. This paper makes a novel attempt to study the interactions among these three important macroeconomic variables (FDI, exports, and growth) with the help of 1965-1995 data from Korea, Singapore and Taiwan. While a general lack of causality is being observed from cointegration and causality test results, some evidences of reverse causalities running from growth to both FDI and exports have been found in the case of Singapore.