OFDI impact on domestic investment efficiency: Based on China´s experience

The impact of outward foreign direct investment on the efficiency of domestic investment is the main subject of controversy about related theoretical and empirical research continuously. This paper creates a model of VAR which the lag is one to study the effect of outward foreign direct investment on the efficiency of domestic investment, and this model can avoid the problems of spurious regression due to the growth of data such as foreign direct investment, domestic investment, export and employment. The results show that a shock to foreign direct investment coming from external conditions can pass to the domestic industrial structure; this shock brings a positive impact on output capital ratio and plays a role of promoting and sustainable effect on output efficiency of domestic capital.