Causal Nexus between Economic Complexity and FDI: Empirical Evidence from Time Series Analysis


Khan H., Khan U., Khan M. A.

CHINESE ECONOMY, vol.53, no.5, pp.374-394, 2020 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 53 Issue: 5
  • Publication Date: 2020
  • Doi Number: 10.1080/10971475.2020.1730554
  • Journal Name: CHINESE ECONOMY
  • Journal Indexes: Emerging Sources Citation Index, Scopus, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, PAIS International, Public Affairs Index
  • Page Numbers: pp.374-394
  • Keywords: ARDL, cointegration, economic complexity, FDI, knowhow, FOREIGN DIRECT-INVESTMENT, INSTITUTIONAL QUALITY, TECHNOLOGICAL CAPABILITIES, ELECTRICITY CONSUMPTION, INTERNATIONAL-TRADE, PRODUCTIVITY GROWTH, DOMESTIC FIRMS, SPILLOVERS, CHINA, LEVEL

Abstract

The rapid economic emergence of China is credited to be its products and economic complexity. Foreign direct investment, with its better-embedded knowhow and technology, is one of the main drivers for the higher economic complexity of China. By applying the ARDL and VECM approaches; this study confirms the long-run bidirectional and short-run unidirectional causal relationship between economic complexity and foreign direct investment. Besides, we include additional control variables such as institutional quality, information & communication technology, trade openness, per capita GDP, domestic investment, and human capital, which are found robust in our analysis.