The Interaction between FDI and Economic Development in D8 Members

As time passes and as economic theories proliferate، new variables have been broached as effective factors in economic development. Among these variables، capital and investment have a considerable significance in the development models. The presents study aims at investigating the effect of foreign direct investment on economic development of D8 member countries using panel data from 1995 to 2008 within the framework of simultaneous equations model. This model in the form of five simultaneous equations and using three 3SLS measures the effect of variables such as FDI، gross capital accumulation، export، and import on economic development. The other variables are rate of formal currency، rate of pay increase، number of labor force and liquidity. The results of the study indicate that there is a significant positive relationship between FDI and economic development in the investigated sample