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How Does FDI Affect Economic Growth

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CONCURRENT IMPACT OF IFRS AND FDI INFLOWS ON ECONOMIC GROWTH: DOES REGION MATTER?
1. Introduction For years the economic growth of countries has been a complex phenomenon constantly influenced by number of both macroeconomic and microeconomic factors (Argiro, 2003; Herbert and Tsegba, 2013). Clarification of these economic factors has brought into recent literature two streams of opinions (Fatma and Jamel, 2013). For instance, theorists of microeconomic factors have opined that, before the initiation of global move for International Financial Reporting Standards (IFRS) in 2001, both policy makers and academics were agitating for the development of a unified financial reporting system with the hope that a unitary system of financial …show more content…

They found that FDI had positive impacts on host countries’ economic growth in situations where it came with technology and knowledge transfers. Again, involving 25 Central and Eastern European and former Soviet Union transition economies for period 1990-1998, Campos and Kinoshita (2002) found a positive impact of FDI on economic growth in their study. Very Similar to Campos and Kinoshita’s (2002) finding, Calvo and Sanchez-Robles (2003) found a positive effect of FDI on growth in 18 Latin America countries employing the interplay between Economic Freedom, growth and FDI using panel data analysis. These results not different from Sub-Saharan Africa (SSA) countries, after engaging 42 Sub-Saharan Africa (SSA) countries from 1990 to 2003 in a study of domestic led growth using OLS and fixed effect estimations, Adams (2009) found that domestic investment positively and significantly affects growth in both OLS and fixed effect estimations, and further asserted that FDI has a positive and significant impact on growth in OLS estimation only. Even though, he further revealed that, FDI initially has a crowding effect on domestic investment but the effect evolves and becomes positive over time. Furthermore, taking into consideration countries’ governance, FDI and economic growth, Yosra et al. (2014) built a sample of 17 Middle East and North Africa (MENA) countries over the period 1996-2011 using the Generalized Method of Moments (GMM) on a dynamic panel. They found a positive and significant impact of FDI on

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