Outward FDI and economic growth

Purpose - The purpose of this paper is to examine the impact of outward foreign direct investment (FDI) on economic growth. Design/methodology/approach - Two econometric approaches are used: cross-country regressions for a sample of 50 countries and time-series estimators for the USA. Findings - Both approaches tell the same story: outward FDI is positively associated with growth. This finding is robust to several model specifications, potential outliers, and different estimation techniques. In addition, Granger-causality tests for the USA indicate that causality is bidirectional, suggesting that increased outward FDI is both a cause and a consequence of increased domestic output. Originality/value - Previous studies have primarily examined the firm-and industry-level effects of outward FDI - for example, on domestic investment, employment, and productivity. This paper, in contrast, deals with the effects of aggregate outward FDI on the economy as a whole.