Co-Integration Study of Relationship between Foreign Direct Investment and Economic Growth

Abstract

Based on basic theories and methods of co-integration study, in this paper the author chooses data of Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) as samples and makes a co-integration study of relationship between FDI and economic growth. Granger Causality Test results show that China’s economic growth would inevitably cause a rise of FDI and the relationship tends to be a one-way causality. Error correction term has a stronger conversely-adjusted effect on the long-term equilibrium relationship between economic growth and FDI.