Causal Interaction between FDI, Capital Formation, Trade and Economic Growth: Evidence from Dynamic Panel Analysis

Meta Ayu Kurniawati

This paper investigates the significance of FDI, capital formation, trade openness, and economic growth in the international scope by classifying data into six regions. The annual datasets consist of 169 countries over the period 1990-2015 were employed. Panel cointegration, panel causality, variance decomposition, and impulse response were deployed to document long- and short-run relationships, to establish the most important macroeconomic variables for economic growth and to assign the proportion of them that explain economic growth. The results show that FDI, CP, TRD, and GDP are linked over the long-run, whereas short-run analysis presents attractive mixed results over six geographic classifications.

DOI : https://doi.org/10.21102/jbpr.2017.07.121.05