Outward foreign direct investment and domestic investment: Evidence from China

Abstract

This paper examines the relationship between outward foreign direct investment (OFDI) and domestic investment (DI) in China using cointegration and Granger causality analyses (including bivariate and multivariate Granger causality models). The results suggest that the conclusions drawn from a bivariate model may not be valid because of the omission of important control variables. The results of the multivariate model show that there is a positive long-run unidirectional causal relationship running from OFDI to DI In the short run, DI and OFDI do not show Granger causality.