Interaction between Domestic and Foreign Direct Investment in Thailand
Nattacha Chayawisan *
School of Information Management, Wuhan University, China
*Author to whom correspondence should be addressed.
Abstract
This paper has investigated interdependency between Foreign Direct Investment (FDI) and Domestic investment in Thailand for period 1975-2013. Following the model which comprises FDI, Investment (INV) and Gross Domestic Product (GDP), and estimated through ADF unit root, Cointegration and Granger Causality. The empirical outcome of this study suggests that FDI, INV and GDP have long run association. The Causality findings also indicate that FDI causes INV, while both FDI and INV are causing GDP, which implies that FDI and Domestic Investment mutually promoting each other and hence reject the crowding out Hypothesis in this case of Thailand. Government should make necessary reforms in order to make sufficient inflow of FDI which will also contribute to economic growth.
Keywords: Domestic investment, Foreign Direct Investment (FDI), cointegration, ECM