22 Pages

Foreign Direct Investment, Trade in Services and Economic Growth: An Introduction

ByShahid Ahmed

Foreign direct investment (FDI) is an important vehicle of technology transfer from developed countries to developing countries. At the same time, trade in services is not only important for its own sake, it also facilitates the effi cient production of and trade in goods. Trade in services and FDI fl ows may have a causal relationship to each other. In principle, causality can run in either or both directions, from FDI infl ows to services trade and, conversely, from services trade to inward FDI. The impact of trade in services and FDI on economic growth and development has received prominence in the process of globalisation. However, the signifi cance of the impact varies across countries depending on the level of human capital, structure and pattern of FDI and trade in services, its relation with domestic investment, infrastructure, economic stability and macroeconomic policies.