The quantitative research of foreign direct investment and economic growth — Taking the case of Shandong Province

Foreign direct investment is playing an increasingly important role in economic growth of Shandong Province. Using econometric methods of Co-integration and Granger causality test, this paper makes an empirical analysis on the short-term and long-term relationship between foreign direct investment and economic growth of ShanDong province during the period 1984-2009. The results suggest: there exists a long-term equilibrium relation between foreign direct investment and economic growth, and foreign direct investment has significant influence on economic growth; error correction model shows that there is a short-run dynamic relationship between foreign direct investment and economic growth; there is two-way Granger causality between foreign direct investment and economic growth. Finally this paper draws conclusions and proposes policy recommendations.