Date Added: Mar 2011
This paper examines the relationship between economic growth as measured by GDP per capita and foreign direct investment for Singapore, using the methodology of Granger causality and Vector Auto Regression (VAR). Evidence shows that there is a unidirectional Granger causation from foreign direct investment to economic growth. Singapore, an island between Indonesia and Malaysia, is the smallest country in Southeast Asia. Singapore is one of the world's most prosperous countries with strong international trading links. Gross Domestic Product (GDP) per capita PPP (Purchasing Power Parity) for Singapore was US$24, 481 in 2003 while real GDP was growing at an average annual rate of 6 percent (Human Development Reports, 2005).