The Syndrome of FDI and Economic Growth: Evidence from Latin American Countries

Abstract

The study investigated the impacts of FDI inflow on the economic growth of Latin American countries for the period 1995 to 2013 by using a panel data model. The countries peculiar characteristics of domestic investment percent of GDP, openness of trade percent of GDP, inflation, human capital, and government expenditure percent of GDP were used to achieve the study objective. Results showed that the current economic growth in the selected Latin American countries was positively affected by the FDI inflow. While findings showed a negative relationship between human capitals and economic growth, they showed a significant relationship between domestic investment and economic growth which suggested that FDI has no crowding out effect on the current domestic investment. In the study attempt to add to the existing knowledge on FDI-led growth, it initiated the research on exploring the seven largest recipients of FDI inflows among Latin American countries. It also attempted to clarify the role human capital endowment played in FDI attraction during the specified period.