Chapter | The Evidence and Impact of Financial Globalization | 2012

Foreign Direct Investment and Growth

by Laura Alfaro and Matthew Johnson

Abstract

This paper examines the evolution of the literature on the relationship between foreign direct investment (FDI) and growth in host countries, particularly developing countries. It provides a broad overview, with a focus on two elements that have recently become particularly important, (1) the role of complementary local conditions conducive to reaping the benefits of FDI (which relate to when FDI will generate growth) and (2) the mechanisms by which FDI creates positive externalities (which relate to how FDI generates growth).

Keywords: economic growth; Spillovers; Complementarity; mechanism; Globalization; Foreign Direct Investment;

Citation:

Alfaro, Laura, and Matthew Johnson. "Foreign Direct Investment and Growth." Chap. 20 in The Evidence and Impact of Financial Globalization, edited by Gerard Caprio, 299–307. Elsevier, 2012.