c) State and discuss the empirical framework that underlies the relationship of the study. FDI= β1

The Foreign Direct Investment is stimulated by diverse macroeconomic factors such as the GDP, GDP per capita and also by the political stability of a country. The US is the country, which receives the more FDI in the world; even tough some other countries recently have increased their FDI considerably in term of growth. The overall quality of the infrastructure in the US

FDI is thought to bring certain benefits to national economies. It can contribute to Gross Domestic Product (GDP), Gross Fixed Capital Formation (total investment in a host economy) and balance of payments. There have been empirical studies indicating a positive link between higher GDP and FDI inflows (OECD a.), however the link does not hold for all regions, e.g. over the last ten years FDI has increased in Central Europe whilst GDP has dropped. FDI can also contribute toward debt servicing repayments, stimulate export markets and produce foreign exchange revenue.

Foreign direct investment (FDI) is created when a company buys assets in foreign country and invest in foreign countries property, plant or equipment, and also the participation a joint venture with a foreign local company. In addition, when a company begins FDI, the company will become a multinational company. Foreign direct investment has been spreader significantly in the previous two decades through the world economy. More and more countries and sectors has constitute to become one of the international foreign direct investment network. An important force creating better global economic combination are represented by different types of FDI. (Mody, 2004). In the following discussion, there will be reasons why China remained

Analyzing various researches on the benefits of the FDI in different industry such as the manufacturing and service, it appears that the benefits vary significantly between the two. The main case for FDI (host country) is that it can positively affect the development of the host country because of the direct financing it supplies and the technology and management

Foreign Direct Investment (FDI) has been considered important for the growth of a country. When the individuals or companies from a country invest in another country, it is regarded as FDI. FDI not only strengthens the manufacturing base of the host country but also contributes to the strengthening of the economic outlook. FDI can be seen as an investment that leads directly to job creation in an economy. The unemployment rate decreases due to FDI, which leads to stability in economic, social and political spheres. This leads to establishing the notion that FDI is necessary for a country because it helps in strengthening the economy of a particular country. Ireland has been benefitted by

The correlation between foreign direct investment (FDI) and economic growth is well documented see (Borensztein, De Gregorio, J-W. Lee 98). Even though there has been an extensive amount of research, which includes both FDI and economic growth, there still seems to be a substantial divide between the results; which are concluded within these papers. To begin in this research paper we will define foreign direct

There is a long standing belief that foreign direct investment (FDI) inflows help the countries to have the opportunity to make further improvements on their economies. In recent decade, this belief strengthened by the fact that faster growing economies tend to attract more FDIs. Even if the direction of causality between FDI and growth is not absolute yet, positive impacts of FDI such as new technology, know-how or creating employment are enough attractive for policymakers. Consequently, investigating factors that pull FDI into country became a crucial topic in the literature.

The world is becoming a global village from the rapid introduction of technology; there should be a need to understand the relationship between foreign investors and the economy. Foreign investors and its impact on the economic growth of a country cannot be over emphasized. A way by which it affects the economy is through the foreign direct investment. Foreign direct investment is defined not only as the transfer of money, but also a mixture of financial and intangible assets such as technology, managerial capability, marketing skills, and other assets (Nahide & Badri, 2014). In various economies they have regulations guiding the actions of foreign investors, but their impact are still felt on the economy, especially the developing countries. It assists in creating employment opportunities as well as improving the Gross Domestic Product (GDP) of the economy. Recently, there has been an increased attention to foreign direct investment; this proves the fact that it’s seen as the main factor of economic growth (Camelia, 2013). Despite the barrier to foreign investment, it has a positive impact on the economic growth of a country.

FDI is where the MNE invests directly in production or other facilities over which it has effective control in a host economy (j &t). According to Pollan (), the definition of the terms “investment” is highly significant to Foreign Direct Investment, which can be typical comprehend as the conveyance of capital to a country. Investment can be defined as money committed or property acquired in order to gain profitable returns, as interest, future income or appreciation in value (business dictionary, 2014). The commonest definition used to understand the idea of FDI is the definition provided by International Monetary Fund’s (IMF). The IMF definition of FDI introduces systems and structures which clearly demarcates foreign direct investment from portfolio investment. According to the IMF, direct investment creates a lasting interest in an enterprise, consisting of a long-term relationship between the investor and the enterprise and that the investor has an outstanding amount of control on the management of the enterprise, while portfolio investment does not create an extended relationship and the portfolio investor is rarely directly partaking in the day-to-day management of the enterprise (Pollan,). FDI however has no comprehensive, authoritative and ubiquitous legal definition and the test for the existence of enough degree of control differs in scope depending on applicable law in a

Foreign Direct Investment as seen as a main source of non-debt inflows and is increasing being required as a vehicle for technology flows and as a means of attaining competitive efficiency by creating a meaningful network of global interconnections. FDI plays a critical role in the economy since it does not only give opportunities to host countries to enhance their economic development but also opens new vistas to home countries to optimize their earnings by employing their ideal resources.

Research on FDI has been one of the most popular topics among the scholars in finance and economics field. In order to start the study, the definition of FDI should be clarified first.

Many writers have tried to figure out if there is a direct link between Foreign direct investment (FDI) and economic growth of an economy in terms of Gross domestic product (GDP) but a reliable procedure hasn’t been found yet.

Country like India which is in developing phase FDI is an important factor to grow rapidly with the use of transferred technology, managerial skills and best practice techniques from foreign developed countries (Hill,2000). A lot of advantages like, gain in capital, training , skill aquisition, knowledge of new technology, and different management practices are associated with the FDI in recipient country . Jenkins and Thomas (2002) argue that FDI can contribute to economic growth not only by providing foreign capital but also by crowding in additional domestic investment; so it increases the total growth effect of FDI. Barrel and Pain (1997) conducted the analysis of impact of FDI and found that in UK alone due to FDI there is growth in 30% productivity of labour between year 1985 -1995. Productivity of the domestic companies also increases by FDI. As FDI provides opportunity for local businesses to interact with foreign companies thus assists in understanding the management skills which results in replication of

This study is focused on the two aspects: market-seeking FDI and resource-seeking FDI. These two aspects which influence the determination of FDI can be denominated by some numerical variables. In terms of market-seeking, GDP and the rate of inflation can be used to measure the market size and market growth respectively. The sum of exports and imports of goods and services indicates the openness of an economy, which also means the availability of access to regional and global markets. On the other hand, raw materials and human capital are the key elements for those resource-seeking enterprises. Thus, labour cost per worker in logs denotes human capital. With all the variables above, a specific regression model are able to build to investigate the research question.

To understand the change i.e. increase and decrease of GDP growth rate with the fluctuations in FDI.