Outward FDI and Domestic Investment: Evidence from World’s Largest Economies

Abstract

This study provides empirical evidence of the impacts of FDI outflows on domestic investment in the world’s largest economies using panel data analysis. Our estimates using system-Generalized Method of Moments (GMM) suggest that FDI outflows have positive effects on domestic investment. From 2002-2014, OFDI had significant long-term effects on domestic investment among the world’s largest economies. Our system-GMM model results show that a one dollar increase in OFDI leads to an increase of 0.0894 dollars of domestic investment in the long term.

Keywords: Outward FDI; Domestic investment; Endogeneity; Panel Data

JEL Classification numbers: C23; F21; F22; F23