Issue |
SHS Web Conf.
Volume 80, 2020
XVII International Conference of Students and Young Scientists “Prospects of Fundamental Sciences Development” (PFSD-2020)
|
|
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Article Number | 01002 | |
Number of page(s) | 8 | |
Section | Economics and Management | |
DOI | https://doi.org/10.1051/shsconf/20208001002 | |
Published online | 25 September 2020 |
Foreign direct investment (FDI) and economic growth in China: vector autoregressive (VAR) analysis
Peoples’ Friendship University of Russia, 117198, Moscow, Russia
* Corresponding author: 604700883@qq.com
This study examines the impact of foreign direct investment (FDI) on economic growth in China based on time series data for the period 1981-2018. For an empirical study, we used vector autoregressive (VAR) analysis. Before building our VAR model, we performed tests for unit root, normality, and heteroscedasticity to certify the data quality. The optimal lag 3 was selected using the Akaike information criterion (AIC), Schwartz (SC), and Hannan-Quinn (HQ) criteria. The Granger causality test is additionally performed. Based on the VAR model, we determined the impulse responses and variance decomposition of log FDI and log GDP in China. The results showed a positive and consistent impact of log FDI on China’s economic growth. The impact in the short-term is insignificant, as it is likely that there are multiple factors drive economic growth of China besides FDI inflows. However, the impact of FDI increases to a significant level in the long-term. Which indicates that FDI is one of the main factors to enhance Chinese economy. In conclusion, we suggest a policy implication how to sustain and promote the existing positive effects of FDI inflows on Chinese economy.
Key words: Foreign Direct Investment (FDI) / Chinese economy / vector autoregressive (VAR)
© The Authors, published by EDP Sciences, 2020
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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