Causal Relationship between Foreign Direct Investment and Growth: Evidence from BRICS Countries

Sridharan, P.; Vijayakumar, N.; K, Chandra Sekhara Rao

doi:10.5539/ibr.v2n4p198

Cited by 19 publications

(5 citation statements)

References 2 publications

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“…The mobility of capital and technology is the single most important reason for lowincome countries to grow at a higher rate (Li and Chen 2010). The stability of FDI inflows and required macroeconomic and financial adjustments have been identified as the contributing factors for economic growth in developing countries (Chao et al 2019;Sridharan et al 2009). The issue that FDI enhances and accelerates economic growth has not received common empirical support.…”

Section: Introductionmentioning

confidence: 99%

“…The positive impact of FDI and foreign trade on economic growth may be realized only by the FDI inflows in the economies that are expected to grow faster and follow open-trade policies (Adhikary 2010;Shimul et al 2009). FDI has been channeled effectively by transferring technology and promoting economic growth in developing countries within the framework of the neoclassical models (Bitzer and Kerekes 2008;Solow 1956;Sridharan et al 2009). Therefore, the host countries should facilitate a financial liberalization and stabilization policy before experiencing any increase in FDI (De Gregorio and Guidotti 1995).…”

Section: Introductionmentioning

confidence: 99%

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Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Sarker

Khan

2020

Financ Innov

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The relationship between foreign direct investment (FDI) inflows and economic growth in host countries is a heavily debated issue. Although some studies have found evidence of the positive impact of FDI on economic growth, others have revealed the opposite result. Studies that examined the causality between FDI and gross domestic product (GDP) also have found evidence of unidirectional causality and, in some cases, a bidirectional causality. This study investigated the causal nexus between FDI and GDP in Bangladesh by employing standard time-series econometric tools, namely, augmented Dickey-Fuller, augmented Dickey-Fuller generalized least square, Kwiatkowski-Phillips-Schmidt-Shin, and Lee-Strazicich unit root tests to check stationarity, augmented autoregressive distributed lag (augmented ARDL) bounds testing approach to check cointegration, and Granger causality to explore the direction of causality. The augmented ARDL model found a long-run relationship between FDI and GDP. In addition, the error correction model and Granger causality results indicated the presence of a unidirectional causality running from GDP to FDI.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Sarker

Khan

2020

Financ Innov

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“…For example, how the bribes hinder and violate the copyright, licensing, and permits issued. Similarly, FDI inflows into different economic sectors have a different impact (Méon and Weill, 2010; Narayanamoorthy et al, 2009; Sarker and Khan, 2020). Again, the corruption at the public administration level and that on the part of regulators might be an important cause of impediments to FDI inflows and the economic disputes between the capitalists and labor class.…”

Section: Discussionmentioning

confidence: 99%

Investigating the moderating impact of crime and corruption on the economic growth of Bangladesh: Fresh insights

Zhang

Quddoos

Khan

et al. 2022

International Area Studies Review

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This study investigates the moderating role of the corruption index with the impacts of foreign direct investment (FDI), unemployment, corruption, and crime rate on economic growth in Bangladesh from 1988 to 2019. The Augmented Dicky-Fuller (ADF) and Phillips-Peron (P-P) unit root tests were applied to check the stationary properties of the concerned variables. The auto regressor distribution lags approach is used to test the hypotheses. The results show that the corruption index as a moderator has a significant adverse impact on economic growth along with the other variables crime, and unemployment on economic growth. To put it simply, economic growth increases by decreasing corruption, unemployment, and crime rates. Similarly, FDI and trade openness appears as a catalyst for boosting economic growth, but the interaction variable of the trade and corruption index increases the trade costs that may slow down the economic growth. As among the pioneer attempts, the present study contributes to growing literature on the moderator role of the corruption index along with other determinants of economic growth by identifying the role of FDI inflows, trade, unemployment, and crime rates on economic growth in Bangladesh. These empirical findings are directed toward some critical policy implications that will help the governmental bodies and policymakers to achieve sustainable economic growth along with ensuring better employment opportunities and thereby control the crime and corruption rates in Bangladesh.

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“…The study finds a significant and robust long-term relationship between inbound foreign direct investment and the growth productivity of the host nations. Several other studies have also examined the long-term relationship between FDI and economic growth (De Mello 1999;Hansen and Rand 2006;Narayanamoorthy et al 2008;Tiwari and Mutascu 2011;Saidi et al 2023). Naveed and Shabbir (2006) studied the impact of foreign direct investment (FDI) and trade openness on gross domestic product (GDP).…”

Section: Literature Reviewmentioning

confidence: 99%

Does FDI Impact the Economic Growth of BRICS Economies? Evidence from Bayesian VAR

Malik,

Sah

2023

JRFM

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This paper examines the dynamic relationship between foreign direct investment (FDI), economic growth, and trade openness in BRICS countries. Our research aims to address a significant gap in the literature by focusing on this crucial group of emerging nations, given their substantial contribution to the global economy. Annual data for these economies from 1991 to 2020 were collected from various secondary sources. This study employed the Bayesian VAR framework to investigate the panel data. The Pedroni residual cointegration test was used to check the existence of a long-run relationship between FDI and economic growth. The results provided evidence that foreign direct investment (FDI) does exhibit a substantial correlation with economic growth in the short run. However, no long-run relationship was found in the case of BRICS economies. This research contributes to methodological innovation by introducing the Bayesian VAR framework, offering a deeper understanding of the dynamic interactions among these key variables. The incorporation of this framework yields estimates that are both stable and reliable, which is certainly a novelty of this paper. The findings of this study have implications suggesting that policymakers from these emerging economies should establish mechanisms that will monitor the short-term impacts of FDI and adjust policies accordingly to maximize economic gains. The government should tailor policies to the specific circumstances of each country for sustainable economic development.

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Causal Relationship between Foreign Direct Investment and Growth: Evidence from BRICS Countries

Cited by 19 publications

References 2 publications

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach

Investigating the moderating impact of crime and corruption on the economic growth of Bangladesh: Fresh insights

Does FDI Impact the Economic Growth of BRICS Economies? Evidence from Bayesian VAR

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