Analysis of the relationship between GDP growth and foreign direct investment in underdeveloped countries: Tar model

Abstract

conomists argue that a relation between foreign direct investments (FDI) and economic growth exists. In many studies, it has been investigated the way FDI affect economic growth. In the literature, it has been concluded that foreign direct investment has a positive impact on economic growth. In some studies, it was determined that there was no causality between economic growth and direct foreign investments. This article differs from the other studies in terms of both its perspective and results. In this article, it is important to analyze how the per capita GDP growth affects FDI in opposition to the studies in the literature and it is thought that this study will contribute to the literature. Another feature that distinguishes this article from others is that the analyses are not linear analysis but nonlinear analysis. Obtained results will guide policy-makers. The results are of great importance for policymakers in underdeveloped countries in terms of saying that they need to keep their GDP per capita above the determined threshold otherwise FDI entering their countries would decrease.