The Causal Linkage between Foreign Direct Investment, Trade and Economic Growth in Mali: An Application of the ARDL bound Testing Approach

Abstract

The aim of this paper is to develop a foreign direct investment inflows(FDI) and evaluate its relationship between trade openness and economic growth for Mali by using Autoregressive distributed Lag approach (ARDL) models over the period of 1980 to2016.The first results indicate that the uni-directional causality relationships between FDI, economic growth and trade. Furthermore, the empirical results show FDI inflows affects economic growth positively in the short and the long run while trade openness positively affects economic growth in the short run and negatively in the long run. While previous literature review focuses on attract foreign direct investment, this paper evaluates the impact of FDI and trade openness on the economic growth. This result shows the evidence of uni-directional causality between FDI and trade on economic growth offer new insights into Mali's openness policy for enhancing growth of FDI inflows and trade.the results pointed out that there are no evidence of causal relationships among FDI to domestic investment in Mali. We can conclude that capital investment promotes export, FDI and economic growth in the short run, and is the main driver of economic growth in Mali.

The dynamic relationship between trade openness, foreign direct investment, capital formation, and industrial economic growth in China: new evidence from ARDL bounds testing approach

“…Secondly, in order to capture long-run and short-run elasticity, the research results show that both long-run and short-run IEG has a positive impact on TRO, FDI and K, and it is also statistically significant, and vice versa. This is consistent with the results of Keho (2017), Fofana et al (2019), and Rani and Kumar (2019). However, different from the short-run, in the long-run, TRO and K have a smaller negative impact on IEG, but it is not statistically significant (Malefane and Odhiambo, 2021).…”

“…Specifically, when the significance level is 5%, the Fstatistics of each tested model is greater than the upper critical value. The research results provide conclusive evidence for a longrun link between TRO, FDI, K, and IEG, and this is consistent with the results of Blyde (2004), Mohammed and Ruslee (2015), Fofana et al (2019), and Kalai and Zghidi (2019). Secondly, in order to capture long-run and short-run elasticity, the research results show that both long-run and short-run IEG has a positive impact on TRO, FDI and K, and it is also statistically significant, and vice versa.…”

“…According to Hao (2021) and Hao et al (2022), the error-correction term (ECM) then specifies the rate at which the model adjusts to long-run equilibrium and there is a period of shocks in the model. In addition, it is assumed that ECM is also negated and has a statistical relevance at the level of significance to account for the long-term correlation between the variables (Qamruzzaman and Wei, 2018;Fofana et al, 2019;Kalai and Zghidi, 2019). Table 8 shows that ECM(-1) for these assigned (IEG, FDI, TRO, and K) models are negative and found to be highly statistically insignificant at the 1% significance level, implying that the adjustment rate of each periodic shock to the model's long-run equilibrium is 82.7%, 102.7%, 101.4%, and 69%, respectively, which also indicates that the post-shock relationship process in the model has a good adjustment rate.…”

“…Therefore, there is a negative spillover effect between foreign trade, capital opening and government scale, and the impact of FDI on government scale is not obvious. On the contrary, Osuji (2015) and Fofana et al (2019) argue that FDI inflows have had a beneficial effect on the development of the economy both in the short-and long-term. It is also found that a single foreign trade economy is not enough to affect economic growth.…”

“…Meanwhile, in the World Report 2021: Global Investment Trends and Prospects from the UNCTAD, it is also stated that FDI and trade openness are complementary and have a positive effect on economic growth. Therefore, for economic growth, FDI inflows are both advantageous growth and advantageous trade, and vice versa (Osuji, 2015;Fofana et al, 2019).…”