Journal Press India^®

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Does outward foreign direct investment (OFDI) triggers domestic investment or does it crowd it out is a major question? These outward investments not only relocate the production abroad but also transfer the scarce financial resources along with it. In the long run this allocation of resources abroad could hamper the domestic investment along with sustained economic development and employment of country of origin. As, BRICS economies have become a significant source as well as destination of such flows, this study empirically analysis the impact of outward investment on domestic investment of BRICS nations. The result shows that domestic investment is the cause of but not a consequence of increased OFDI concluding that there is lack of investment opportunities at home and the economies should design such OFDI policies that could trigger its domestic investment and promotes economic development and capital formation in the long run.

Keywords

OFDI; BRICS; Cointegration; VECM; Granger causality.

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