An Analysis of Foreign Direct Investment Flows into Mongolia

To study the current situation of foreign direct investment in Mongolia, we have calculated the amount of concentration using the Herfindahl-Hirschman index, and tested the long-term and short-term relationships using the Autoregressive Distributed Lag model (ARDL). We have shown that, in the long-run, a 1 percent increase in FDI inflows into Mongolia would increase real GDP growth by 0.32 percent. If Mongolia s export growth increases by 1 percent, the GDP growth rate will increase by 0.88 percent. However, the previous coefficient of the error correction model (ECM t_1) has a negative (-) sign as expected and is statistically significant. For this model, -0.05 indicates that the short-term deviation from the long-term equilibrium is 5 percent per quarter.