Exploring the driving factors of economic growth in the world's largest economies

Abstract

This study explores the main factors of economic growth in a panel of the world's 20 biggest economies considering the data period of 39 years . In particular, the roles of international trade, energy use, human capital, and foreign direct investment (FDI) are examined in addition to the roles of capital and labour. To estimate the results the panel autoregressive distributed lag (ARDL) method of Pool Mean Group (PMG) estimator and heterogeneous panel causality test are used with due consideration of cross sectional dependence test, cointegration test and other necessary diagnostic tests. The obtained results ratify the cointegration among the variables used. Energy use, trade, capital, labour, human capital development and foreign direct investment have positive and significant impacts on the economic growth of these countries in the long run. In the short run energy use, trade and capital also have positive and significant effects, but human capital has negative effect on economic growth. A bidirectional causal relationship between economic growth and trade, capital, labour and human capital, and a unidirectional causal link from economic growth to energy use and foreign direct investment are also found. The obtained results are theoretically consistent, and therefore have important policy implications.

How are FDI and green recovery related in Southeast Asian economies?

“…In the first strategy, we consider the growth model used by Rahman and Alam ( 2021 ), where economic growth is a function of per capita energy consumption, per capita trade, per capita capital, FDI inflows, and human capital index, obtained from the World Development Indicators, the World Bank database, BP and Feenstra et al ( 2015 ). To find a suitable estimation technique, the cross-sectional dependence test, the cross-sectional augmented Dickey Fuller (CADF) of Pesaran (2007) and the panel cointegration test of Kao (1999) are conducted.…”

Are Tourism and Energy Consumption Linked? Evidence from Australia

“…Additionally, GDP-usually a proxy for economic growth and energy consumption-is co-dependent with energy use-that is, an increase in energy use causes economic growth to increase, and vice versa [55][56][57][58][59]. Likewise, gross fixed capital formation [60] and financial development [61,62] stimulate energy consumption.…”

Investigating the determining factors of sustainable FDI in Vietnam

“…According to Baccini et al (2019), Co et al (2018) and Vu (2016), the year of 2007 is the unique step of Vietnam in the way of globalization and economic openness. In addition, we transform all variables in Equation ( 2) into logarithmic form to mitigate the existence of heteroscedasticity and change the slope coefficients into elasticity (Rahman and Alam, 2021).…”