Written by Mekong Institute

This paper examines the impact of foreign direct investment (FDI) on economic growth and the  linkages  between  FDI  and  domestic  investment (DI) in  Cambodia.  This  study  uses secondary data from 36 countries and covers the time period 2004-2012 in order to determine the impact of FDI inflows on economic growth by using macroeconomic and dynamic panel data  analyses of the  impact  of  FDI  on  domestic  investment.  The  study  finds  that  there  are positive  relationships  between FDI  and growth.  The  estimation  in  this  paper  shows  that human capital has a insignificant but positive relationship with FDI through a spillover effect. The estimation techniques are fixed and random effects. The Hausman test indicates that the fixed  effects  are  more  applicable.  The  Generalized Method  of  Moments  (GMM) technique for panel data shows that FDI had a positive but insignificant impact on domestic investment. The  author  neither  rejects  the  hypothesis  that  FDI  crowds out  domestic  investment  nor accepts that FDI has a direct impact on domestic investment. Therefore, this study suggests a negative competition effect that dominates a positive technology effect.