Outward foreign direct investment and domestic investment: evidence from China

This paper examines the relationship between outward foreign direct investment (OFDI) and domestic investment (DI) in China using co-integration and Granger causality analyses (including bivariate and multivariate Granger causality models). The results suggest that the conclusions drawn from a bivariate model may not be valid because of the omission of important control variables. The results of the multivariate model show that there is a positive long-run unidirectional causal relationship running from OFDI to DI In the short run, DI and OFDI do not show Granger causality.