Foreign direct investment and economic growth in Asia: a spatial econometric analysis

The academic literature provides a lively debate on the impact of FDI on economic growth. Several empirical time series and cross-country studies show mixed evidence concerning the role of FDI in the recipient country’s growth process. However, the existing research has not accounted for the potential existence of spatial interdependence among countries. We argue that such omission may result in biased estimates. To the best of our knowledge, this paper provides, for the first time, a spatial investigation in this area in the context of 30 Asian countries spanning the period 1996-2019. Our econometric analysis indicates that FDI not only has a robust positive impact on the growth process of the host country but also exerts a positive spillover effect on the growth of the neighbouring countries.