MODEL OF CAUSALITY BETWEEN FDI AND GROSS DOMESTIC PRODUCT ON ASEAN-5 COUNTRIES FROM 1980-2014

Abstract

The research examines the relationship between Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) for ASEAN-5 countries between the periods of 1980 to 2014. The study uses a Toda-Yamamoto granger causality model to test the causality between the FDI and the GDP. The results show that the ASEAN countries are differently in responding the impacts of FDI to the GDP. In general, the FDI leads to GNP in Singapore and Thailand while, in Indonesia and Malaysia, the GNP leads to FDI. In the case of Philippines, there is no causality relationship between the two variables found.