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The Causal Relationship Between Information and Communication Technology and Foreign Direct Investment
Author(s) -
Gholami Roghieh,
Tom Lee SangYong,
Heshmati Almas
Publication year - 2006
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2006.00757.x
Subject(s) - foreign direct investment , causality (physics) , information and communications technology , economics , investment (military) , granger causality , international economics , developing country , monetary economics , macroeconomics , econometrics , economic growth , political science , politics , law , physics , quantum mechanics
This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and flows of foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economic development for the period 1976–99. Our causality test results suggest that there is a causal relationship from ICT to FDI in developed countries, which means that a higher level of ICT investment leads to an increase inflow of FDI. ICT may contribute to economic growth indirectly by attracting more FDI. Contrarily, we could not find significant causality from ICT to FDI in developing countries. Instead, we have partial evidence of opposite causality relationship: the inflow of FDI causes further increases in ICT investment and production capacity.