Foreign Knowledge Spillovers and Total Factor Productivity Growth: Evidence from Four ASEAN Countries

This study examines the dynamic relationship between foreign direct investment (FDI) and total factor productivity having controlled for other channels of external openness: exports and imports in four ASEAN countries: Indonesia, Malaysia, Singapore, and Thailand. We employ the panel data analysis PDA (fixed effect and dynamic panel models) as well as the panel cointegration and Granger causality methods, using the data set for the period 1975-2010. The empirical results provide strong evidence on the impact of FDI and other channels of external openness on total factor productivity in ASEAN countries. We also find a short run and long run causality among these variables during the period of our study.