The effects of foreign direct investment on the economic growth of developing countries: Panel data analysis

Foreign Direct Investment (FDI) movements which have shown a notable increase in the last 20 years enabled FDI to take a significant place in the development strategies of the host countries. For the host countries, an era in which they can be exposed to the positive or negative effects of FDIs has begun and this increasing FDI activities brought along many discussions and criticisms.In this direction, depending upon absorptive capacities and the structures of the FDIs in the host countries, answers of the questions whether or not FDIs have positive effects on economic growth, have been researched for the generated sample and its subgroups.Accordingly, with respect to the analysis applied to 49 developing countries by using panel data analysis method on a model that contains OLS and 2SLS regressions gradually for the years 1991-2009, it has been presented that, the FDI structure in the host countries and the absorptive capacities of these countries do not have a significant effect on the growth effects of the FDIs. According to the analysis, it has been also presented that the FDIs do not have a positive contribution to the economic growth of the host countries.In the results of the analysis applied to the subgroups of the sample, for the group of countries that receive below-average FDI and for the countries in Asia, and at the 90% confidence interval for the countries in America, it has been also presented that the absorptive capacities of these countries, have increasing contributions to the positive growth effects of FDIs on these countries. However in countries in Africa, FDIs have negative effects on economic growth of the host countries.