Sectoral Effects of Foreign Direct Investment on Host Country Economic Growth: Evidence from Emerging Countries

Abstract: In this paper, I study the effect of foreign direct investment (FDI) on a group of host country economic growth for the period 1994-2011. Using aggregate level FDI data for a group of five emerging countries, the paper reveals that FDI has a positive effect on economic growth. Then I use sectoral data and test whether all the sectors have positive effects on growth. The results vary across the sectors. The results seem to be positive for mining and quarrying as well as manufacturing sector, while trade and financial intermediation sectors to have a negative effect on economic growth.