Does Foreign Direct Investment Stimulate Economic Progress of a Developing Country? Empirical Evidence from Bangladesh

Abstract

This study attempts to throw light on the impact of Foreign Direct Investment (FDI) on the Economic Growth (EG) of Bangladesh. Augmented Dickey Fuller unit root test is applied to test the data stationarity of time series data from 1975 to 2015. Johansen Cointegration Model shows that both FDI and economic growth are co-integrated. Vector Error Correction Model indicates that economic growth depends on FDI in the long-run, whereas no short-run causality is found through Wald test. Granger Causality test suggests that FDI and EG have bidirectional relation and cause each other.