An empirical study on the crowding in-out effects of FDI on domestic investment in Jiangxi Province

Select the data of GDP, domestic real investment in fixed assets and the actually utilized foreign direct investment from 1984 to 2009 in Jiangxi Province. Based on the framework of VAR model, the article uses cointegration test, impulse response function and vector error correction model to analyze FDI´s effect on total domestic investment in Jiangxi Province. By empirical analysis, it shows: in the long-run equilibrium state, FDI crowds in domestic investment, and in the short-run, FDI crowds out domestic investment. According to the conclusions of empirical research, the main purposes of this paper are to analysis the problems in using FDI and to give the suggestions about how to take advantage of FDI and reduce its negative impact.