Economic Growth and FDI Relationship: VECM Analysis

English

Abstract

This research study was conducted to investigate and explore the correlation of FDI and economic growth in America. This study makes use of secondary data from the World Bank covering the years 1999 through 2019. The analytical method used is quantitative by modeling the Vector Error Correction Model (VECM) using the variables FDI net inflow, FDI net outflow, and GDP in America. A significant positive relationship can be seen from the GDP which affects the FDI net inflow. So this positive trend implies that increased economic growth will increase FDI flows. However, in particular there is a negative influences GDP and FDI net outflow. Besides that, the causality relationship only occurs in the FNI variable that affects GDP. While the other variables do not experience a causal