FDI, policy adjustment and endogenous growth: Multiplier effects from a small dynamic model for Taiwan, 1959–1995

As a consequence of endogenous growth theory, foreign direct investment (FDI) has a newly-perceived potential role in the growth process. In this paper, a small, pilot, dynamic model of Taiwan is formulated to link (endogenous) growth from the supply side to exogenous influences which incorporates a...

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Bibliographic Details
Published in:World development 1998-07, Vol.26 (7), p.1315-1330
Main Authors: Bende-Nabende, A., Ford, J.L.
Format: Article
Language:English
Subjects:
Capital flow
Econometrics
ECONOMIC ANALYSIS
Economic growth
Economic Growth (1959-95)
Economic infrastructure
Economic Policy
Effects
endogenous growth theory
Fiscal policy
Foreign direct investment
Foreign investment
Foreign Investments
growth
Infrastructure
International finance
Liberalization
Monetary policy
Multiplier
multiplier effects
Taiwan
TAIWAN AND REPUBLIC OF CHINA
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Summary:As a consequence of endogenous growth theory, foreign direct investment (FDI) has a newly-perceived potential role in the growth process. In this paper, a small, pilot, dynamic model of Taiwan is formulated to link (endogenous) growth from the supply side to exogenous influences which incorporates aspects of most types of economic governance, including monetary and fiscal policy, “liberalization” and indicators of the extent of infrastructural development. Impact and dynamic multiplier effects are calculated from the econometric results for FDI and seven other endogenous variables with respect to nine exogenous variables. Among the findings of interest are that FDI promotes growth, and that the most promising policy variables are infrastructural improvements and liberalization.
ISSN:0305-750X
1873-5991
DOI:10.1016/S0305-750X(98)00043-6