The impact of foreign direct investment on economic growth of less Essay

The impact of foreign direct investment on economic growth of less developed countries - Essay Example However, in open economy investment is funded both through household savings and foreign capital flows, incorporating FDI. FDI facilitates investment-receiving (host) nations to attain investment levels ahead of their capability to save (Atique, Ahmad and Azhar, 2004, p. 1). The study aims to discuss about the underlying effect of foreign direct investment on economic growth of the less developed or the developing nations. The study seeks to analyze whether the inflow of foreign direct investment is really leading to economic growth and capital formation within the less developed countries. The topic â€Å"The impact of foreign direct investment on economic growth of less developed countries† seems to be interesting and relevant. Through this topic, the study seeks to find whether these inflows of foreign capital can be sustained within the less developed economies. Whether the transnational players in the international economy could contribute to the modernization of the economies of developing countries is also the point of concern in this study. Development Economics is a topic that studies the economics of the developing nations. It has made exceptional use of economic hypothesis, econometric methods, sociology, anthropology, political science, ecology and demography and has mushroomed into one of the liveliest parts of study in all the social sciences. It is reasonable to say that the model of economic growth initiated by Robert Solow in 1956 has had an elementary impact on development economics. An addition to the capital stock will have a larger effect on per-capita income. It implies that by means of controlling parameters (for example, savings rates and population growth rates), poorer nations will tend to develop faster and hence will come up to reach the levels of comfort enjoyed by their affluent counterparts (Ray, 2007, pp.