Foreign direct investment, trade openness and economic growth in BRICS countries: evidences from panel data

Abstract

In this paper we investigate the causal relationship between foreign direct investment, trade openness and gross domestic product in BRICS countries over the period of 1990–2018. We applied auto regressive distributed lag model to test cointegration and the Dumitrescu and Hurlin Granger causality tests. Empirical results show that FDI and trade openness have a positive impact on long-term economic growth. We also find there is a long-run relationship from both real effective exchange rate and gross capital formation to economic growth. The main results of causality analysis reveal that there is bidirectional causality from foreign direct investment to economic growth, trade openness to foreign direct investment, and unidirectional causality from trade openness to foreign direct investment.

Keywords:

• Trade openness
• economic growth
• FDI
• Panel causality and BRICS
• Gross capital formation

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

For undertaking the empirical analysis, we use the World Bank data for the following variables. The study covers the period from 1991 to 2015 and is based secondary data which is available at https://data.worldbank.org

Additional information

Notes on contributors

Umer Jeelanie Banday

Umer Jeelanie Banday has completed M.Phil economics and has submitted PhD economics. I have published many paper in quality journals like Nature, Routledge, Emerald and Sage. I am specialised in International trade, Public economics and Environmental Eeconomics.

Saravanan Murugan

Saravanan Murugan is the government Servant know as Indian Administrative Services (IAS) which is top exam of the India. He has worked in various departments like PMO New-Delhi, Ministry of commerce and Industries as a director.

Javeria Maryam

Javeria Maryam has done PhD in economics from Aligarh Muslim University and specialised in International trade and has many publication in this area. Presently she is working as a Senior Research Fellow in WTO Studies, Indian Institute of Foreign Trade, Nnew-Delhi, India.