| As the economic globalization is developing rapidly, joining into the international wave of economic development is not just some simple words but an effective strategy to make great progress which has been chosen without hesitation. Foreign direct investment is playing an important role in economic growth in develop-ing countries. Since China's reform and opening up was carried out, a series of policies has been taken to attract foreign capital. FDI can not only increase domestic capital stock but also bring spillover effects. Foe example, it can supply more job, bring in advanced technology and promote exportation. Therefore, it is now attract a lot of attentions of academic circle to study the mechanism and correlation between foreign investment and the development of economy.Lianyungang City, one of the three coastal line cities, has been in a depression location of this coastal economic belt. In 2009, the State Council formally brought out the national strategies of developing coastal cities, which is a precious opportunity to Lianyungang. At present, there are little studies about local situation and the relation-ship between local FDI and economic developing. In this paper, we make a deep anal-ysis about Lianyungang's foreign direct investment. By consulting a variety of docu-ments and collecting regional data, we use mathematical method to examine the relationship of these two factors as well as analyze the contribution rate of FDI. Based with the result, we can give some empirical support and help adjust the local policy to absorbing foreign capitals.In this paper, we establish a theory framework, containing theories of foreign direct investment, economic growth theory. On the basis of define the concept of FDI, we combine the theory and reality and analyze the current foreign investment situation in Lianyungang as well as its potential to absorbing FDI. Furthermore, we discussed how the FDI was used, how it was attributed and what the problem was.Based on the analysis of the existing situation, we build an appropriate model by studying previous methods about foreign direct investment. And furthermore, using data of Lianyungang Economic Growth and Foreign Direct Investment between 1994 and 2008, we take empirical analysis of the relationship. First, in order to classify the interactions between the two, we use Granger causality test to validate whether there is a causality relationship between the Foreign Direct Investment and Economic Growth. The result of Granger causality test is the basis of linear regression. So after that, we use least squares regression of time series to analyze the contribution of Foreign Direct Investment to the Economic Growth. And finally, according to the distribution of Foreign Direct Investment among different industries, we analyze the contributions to each industry output growth in detail. The results of Empirical analysis are as follows. FDI and the GDP time series are non-stationary time series, the two logarithmic second-order difference sequences showed stable characteristics. Granger causality test results indicate that there were significant Granger causality between FDI and GDP. According to the result, we can get a conclusion that foreign direct investment is the cause of economic growth while increasing GDP has no significant effect on the FDI growth. The linear regression analysis showed one unit increase in foreign direct investment will bring 0.424 units GDP growth. Finally, the Granger causality test results of the GDP in each industries and FDI that flow into indicate that:foreign direct investment that flow into first industry is of small amount and therefore there was no Granger causality relationship between them. Meanwhile The results of linear regression did not pass the significance test; there was Granger causality relationship between the second industry and foreign direct investment. The growth of FDI is the cause to second industry's GDP growth. The results of linear regression passed the significance test in a 1% level; there was Granger causality relationship between the tertiary industry and the inflow of foreign direct investment. The results of linear regression passed the significance test in a 1% level and the fitting degree is better.Finally, based on the empirical analysis we sum up the whole paper. And according to the relevant conclusions, we give some related policies and recommend-dations about how to made effective use of foreign investment. Based on empirical results this paper gives the following suggestions:First, foreign direct investment is the cause of Lianyungang's GDP growth. But compared with southern cities of Jiangsu, there is a large gap. So it is suggested that government departments invest more human, material and financial resources in the building investment environment to attract more foreign investment and promote local economic growth. Second, expand foreign direct investment sources and channels; third, strengthen the laws, and establish a good market order... |
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