Essays on foreign direct investment

This dissertation is comprised of three empirical studies investigating foreign direct investment (FDI) flows and a country's economic performance. Chapter 2 studies the effect of FDI inflows on the economic growth of the host country by focusing on the impacts of different types of FDI inflows. Based on data for 12 Asian economies over the period of 1987–1997, the empirical results show that FDI inflows in the manufacturing sector have a significant and positive effect on the host country's economic growth while FDI inflows in non-manufacturing sectors do not. These results suggest that previous literature underestimates the effect of manufacturing FDI on economic growth because of inappropriate aggregation.; Chapter 3 examines the relationship between a country's business cycles and its FDI outflows. Data from 48 countries and 45 countries over the period of 1970–2001 are employed. The results show that business cycles of a country have a negative effect on its FDI outflows. Larger business cycles lead to lower level of FDI outflows. The results are more pronounced in OECD countries. In addition, fluctuations of economic growth in a boom impose less negative effects on FDI outflows than fluctuations of economic growth in a recession.; Chapter 4 focuses on how FDI inflows affect the host country's domestic investment. Regression analysis of 50 countries over the period of 1970–2001 indicates that current FDI inflows crowd out host country's domestic investment. In other words, an increase in current FDI inflows decreases host country's domestic investment. However, the cumulative effect of recent and previous FDI inflows is positive on domestic investment in non-OECD countries.