Analysis on the Spillover Effect of Foreign Direct Investment: Case of Suzhou

Abstract

Based on time series data of Suzhou from 1991 to 2008, this paper carries out empirical research on the spillover effect of foreign direct investment by using ADF test, Granger causality test and regression method. The result shows that foreign direct investment has spillover effect to GDP which is the Granger cause of GDP in Suzhou. Meanwhile, the inverse relationship does not hold. We also find in the short run, foreign direct investment can increase GDP significantly and positively, but in the long run, it has negative effect on GDP of Suzhou.