The foreign direct investment economic growth nexus
The nexus between foreign direct investment (FDI) and economic growth has been a long standing debate from mixed empirical findings. There is also a possibility of a bi directional relationship between FDI and economic growth. This paper investigates FDI growth associations using a simultaneous system of equations approach of 124 cross country data for the period 1971 2010. Results from the estimation indicate that overall effects of FDI are positively associated with growth and vice versa; whereas labor force, trade openness and economic freedom are other key determinants of FDI, which in turn stimulate income growth further.