The relationship between economic growth, foreign direct investment, trade openness, and unemployment in South Asia
Main Article Content
Abstract
The aim of this article is to investigate the relationship between gross domestic product (GDP) growth rate, inflow foreign direct investment (FDI), trade openness, and unemployment in five South Asian countries between 1998 and 2017 using a vector autoregressive model. It has been empirically found that GDP growth rate and unemployment have positive relationships with FDI. Results demonstrated that there is a directional relationship running from FDI to GDP growth rate and from FDI to unemployment. The study shows that there is a long-run relationship between GDP growth rate, FDI, trade openness’s and unemployment in the region. Macro policies are recommended to accelerate economic growth, FDI, and reduce unemployment rate in South Asia.
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Adeola, O., & Ikpesu, F. (2016). An empirical investigation of the impact of bank lending on agricultural output in Nigeria: A vector autoregressive (VAR) approach. The Journal of Developing Areas, 50(6), 89–103.
Adhikary, B. K. (2011). FDI, trade openness, capital formation, and economic growth in Bangladesh: A linkage analysis. International Journal of Business and Management, 6(1), 16–28. https://doi.org/10.5539/ijbm.v6n1p16
Arvin, M. B., Pradhan, R. P., & Nair, M. (2021). Uncovering interlinks among ICT connectivity and penetration, trade openness, foreign direct investment, and economic growth: The case of the G-20 countries. Telematics and Informatics, 60, 101567. https://doi.org/10.1016/j.tele.2021.101567
Baig, M. M., Kiran, S., & Bilal, M. (2016). Relationship between FDI and GDP: A case study of South Asian countries. Journal of Business & Financial Affairs, 5(3), 2–4.
Bashir, T., Mansha, A., Zulfiqar, R., & Riaz, R. (2014). Impact of FDI on economy growth: A comparison of South Asian states & China. European Scientific Journal, 10(1), 446–469.
Bibi, S., Ahmad, S. T., & Rashid, H. (2014). Impact of trade openness, FDI, exchange rate and inflation on economic growth: A case study of Pakistan. International Journal of Accounting and Financial Reporting, 4(2), 236–257. https://doi.org/10.5296/ijafr.v4i2.6482
Choi, Y., & Baek, J. (2017). Does FDI really matter to economic growth in India? Economies, 5(2), 1–9. https://doi.org/10.3390/economies5020020
Dutta, C. B., Haider, M. Z., & Das, D. K. (2017). Dynamics of economic growth, investment and trade openness: Evidence from Bangladesh. South Asian Journal of Macroeconomics and Public Finance, 6(1), 82–104. https://doi.org/10.1177/2277978717695150
Hsiao, C. (2014). Analysis of panel data (3rd ed.). Cambridge University Press. https://doi.org/10.1017/CBO9781139839327
IMF (2018). South Asia: The robust outlook continues. South Asia Regional Update, January 2018. https://www.imf.org/~/media/Files/Countries/ResRep/IND/2018/011918.ashx
Jha, G. M., Agrawal, A., Gupta, A., & Mishra, A. K. (2013). Determinants of FDI in South Asia. International Research Journal of Social Sciences, 2(1), 1–6.
Joshua, U., Bekun, F. V., & Sarkodie, S. A. (2020). New insight into the causal linkage between economic expansion, FDI, coal consumption, pollutant emissions and urbanization in South Africa. Environmental Science and Pollution Research, 27, 18013?18024. https://doi.org/10.1007/s11356-020-08145-0
Kher, P. (2012). Political economy of regional integration in South Asia. Background Paper No. RVC 5, UNCTAD October 2012. https://unctad.org/system/files/official-document/ecidc2013misc1_bp5.pdf
Lütkepohl, H., Saikkonen, P., & Trenkler, C. (2001). Maximum eigenvalue versus trace tests for the cointegrating rank of a VAR process. The Econometrics Journal, 4(2), 287–310. https://doi.org/10.1111/1368-423X.00068
Masipa, T. S. (2018). The relationship between foreign direct investment and economic growth in South Africa: Vector error correction analysis. Acta Commercii - Independent Research Journal in the Management Sciences, 18(1), 1–8. https://doi.org/10.4102/ac.v18i1.466
Musunuru, N. (2017). Causal relationships between grain, meat prices and exchange rates. International Journal of Food and Agricultural Economics, 5(4), 1–10.
Panos South Asia (2013). Globalisation and labour in South Asia. Institute for Development Alternatives, Chennai, February 2013. https://www.researchcollective.org/Documents/Labour_Globalisation.pdf
Pfaff, B. (2008). VAR, SVAR and SVEC models: Implementation within R package vars. Journal of Statistical Software, 27(4), 1–32. https://doi.org/10.18637/jss.v027.i04
Pradhan, R. P., Arvin, M. B., Hall, J. H., & Nair, M. (2017). Trade openness, foreign direct investment, and finance-growth nexus in the Eurozone countries. The Journal of International Trade & Economic Development, 26(3), 336–360. https://doi.org/10.1080/09638199.2016.1249392
Pradhan, R. P., Arvin, M. B., Hall, J. H., & Bennett, S. E. (2018). Mobile telephony, economic growth, financial development, foreign direct investment, and imports of ICT goods: the case of the G-20 countries. Economia e Politica Industriale, 45(2), 279–310. https://doi.org/10.1007/s40812-017-0084-7
Pradhan, R. P., Arvin, M. B., Bahmani, S., & Hall, J. H. (2019a). Attaining economic growth through financial development and foreign direct investment. Journal of Economic Studies, 46(6), 1201–1223. https://doi.org/10.1108/JES-04-2018-0136
Pradhan, R. P., Arvin, M. B., & Hall, J. H. (2019b). The nexus between economic growth, stock market depth, trade openness, and foreign direct investment: the case of ASEAN countries. The Singapore Economic Review, 64(3), 461–493. https://doi.org/10.1142/S0217590817500175
Sahoo, M., & Sethi, N. (2020). An empirical insight into the financial globalization–growth nexus via trade openness: Evidence from select South Asian countries. Global Business Review, 1–18. https://doi.org/10.1177/0972150919893840
Saidu, B. M., & Muhammad, A. A. (2015). Do unemployment and inflation substantially affect economic growth? Journal of Economics and Development Studies, 3(2), 132–139. https://doi.org/10.15640/jeds.v3n2a13
Suharsono, A., Aziza, A., & Pramesti, W. (2017). Comparison of vector autoregressive (VAR) and vector error correction models (VECM) for index of ASEAN stock price. AIP Conference Proceedings, 1913(1), 020032. https://doi.org/10.1063/1.5016666
Thayaparan, A. (2014). Impact of inflation and economic growth on unemployment in Sri Lanka: A study of time series analysis. Global Journal of Management and Business Research, 13(5), 45–54.
Udemba, E. N., Magazzino, C., & Bekun, F. V. (2020). Modeling the nexus between pollutant emission, energy consumption, foreign direct investment, and economic growth: new insights from China. Environmental Science and Pollution Research, 27, 17831–17842. https://doi.org/10.1007/s11356-020-08180-x
Udi, J., Bekun, F. V., & Adedoyin, F. F. (2020). Modeling the nexus between coal consumption, FDI inflow and economic expansion: does industrialization matter in South Africa? Environmental Science and Pollution Research, 27, 10553–10564. https://doi.org/10.1007/s11356-020-07691-x
Uzuner, G., Bekun, F. V., & Saint Akadiri, S. (2017). Public expenditures and economic growth: Was Wagner right? Evidence from Turkey. Academic Journal of Economic Studies, 3(2), 36–40.
World Bank (2018). Jobless growth. South Asia Economic Focus Spring. https://openknowledge.worldbank.org/bitstream/handle/10986/29650/9781464812842.pdf
World Bank (2019a). World development indicators. Annual GDP growth of South Asian countries. Retrieved 28 April 2019 from https://databank.worldbank.org/data/reports.aspx?source=2&series=NY.GDP.MKTP.KD.ZG&country=#.
World Bank (2019b). World development indicators. Inflow FDI of South Asian countries. Retrieved 28 April 2019 from https://databank.worldbank.org/data/reports.aspx?source=2&series=BX.KLT.DINV.CD.WD&country=#.
World Bank (2019c). World development indicators. Trade openness of South Asian countries. Retrieved 28 April 2019 from https://databank.worldbank.org/data/reports.aspx?source=2&series=TG.VAL.TOTL.GD.ZS&country=#.
World Bank (2019d). World development indicators. Unemployment rates of South Asian countries. Retrieved 28 April 2019 from https://databank.worldbank.org/data/reports.aspx?source=2&series=TG.VAL.TOTL.GD.ZS&country=#.
World Bank (2021). World Development Indicators. Retrieved from https://databank.worldbank.org/reports.aspx?source=2&series=NV.AGR.TOTL.ZS&country=#
Yelwa, M., David, O. O., & Awe, E. O. (2015). Analysis of the relationship between inflation, unemployment and economic growth in Nigeria: 1987–2012. Applied Economics and Finance, 2(3), 102–109. https://doi.org/10.11114/aef.v2i3.943