The Influence of Foreign Direct Investment (FDI) on the Economic Essay

The Influence of Foreign Direct Investment (FDI) on the Economic Growth of the Host Economies - Essay Exampleects of FDI on frugal growth in emcee countries greatly depend upon the local conditions and contexts of doing business there for example, human capital enhances the positive effect of FDI on array economies, while the existing technology gaps make it possible to implement even the simplest foreign unionise investment reforms (Wang, Gu, Tse & Yim, 2012). Added to this is the agency which market size plays in attracting FDI to host countries, whereas technology-absorptive abilities predetermine host returns from FDI (Li & Liu 2005 Blalock & Gertner 2008). These results have far-reaching implications for insurance policy development and implementation, although all risks and factors changing the nature of FDI influxs to host countries need to be thoroughly considered. Even more interesting are the results of some other study conducted in the three major countries-recipi ents of FDI. These include Malaysia, Chile, and Thailand (Chowdury & Mavrotas 2007). Again, the researchers confirm that the effects of FDI on economic growth are very heterogeneous and primarily depend upon the level of gross domestic product in host countries (Chowdury & Mavrotas 2007). At least in Thailand and Malaysia, the relationship between GDP and FDI is very univocal (Chowdury & Mavrotas 2007). Again, these findings have far-reaching implications for policymaking, since understanding causality between FDI and economic growth is crucial for the creation of policies that encourage the inflow of investments from abroad in the developing world. Both studies confirm the importance of the FDI-economic growth causality but as well as imply that the nature of this causality and its setion should be placed under professional scrutiny. As broad as the effects of FDI on economic growth in host countries are characterized by considerable...This demonstrate outlines the difficultie s in establishing the functional relationships of FDI influence on economic growth in host countries. One of the great problems in this respect is the lack of sufficient empirical data. Another difficulty is the lack of organization and poor people systematization of the existing knowledge.Theoretically, FDI promotes economic growth through an increase in investment volumes, leading to increase efficiency of all economic and financial operations. Another theory suggests that economic growth is a direct result of the technological diffusions caused by FDI. Objectively, there is no single explanation to the effects of FDI on economic growth numerous variables moderate the relationship between FDI and economic growth in host countries, and the accredited knowledge of financial markets and macro/microeconomics does not allow producing a comprehensive theory of FDI and its impacts on host countries economies. In order to understand how and why FDI impacts host countries economic growth , the meaning of both terms necessarily to be clarified. For the goal of this paper, foreign direct investment is defined as the process whereby residents of one boorish (the source country) acquire ownership of assets for the purpose of controlling the production, distribution, and other activities of a firm in another country.FDI impacts economic growth through structural effects, skill and technology, and size effects. TNC play a huge role in the transfer of capitals and skills from one country to another.