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.