The Impact of FDI on Developing Countries

I. IntroductionForeign direct investment (FDI) has been one of the defining features of the world economyover the last two decades. It has grown at an unprecedented pace for more than ten years,with only a slight interruption during the recession of the early 1990s. Almost all economiesnow are competing to attract multinational corporations (MNCs). Inward FDI flows havebeen far exceeding private debt flows until recently in some emerging market economies. Interms of geographic distributio…

The Impact of FDI on Developing Countries

Today most developing countries take FD1 as an important resource for development. There are many factors that might attract FD1 to a certain region. However, the real economic effects of FD1 on the economic growth are almost impossible to measure precisely. In this article, our analysis starts with the micro-level including the banking sector and corporate sector, then it moves to the macro-level in which trade, employment and balance of payments are discussed. Both theoretical and empirical evidence suggests that FD1 has a beneficial impact on the economic growth in host countries. Therefore FD1 will continue to remain an important engine of growth in a majority of the developing countries.