Exploring Dynamic Linkages Between Inward FDI and India’s Economic Growth

2019 ◽  
Vol 8 (2) ◽  
pp. 109-117
Author(s):  
Rakesh Shahani ◽  
Aayushi
Keyword(s):  
Economic Growth ◽  
Serial Correlation ◽  
Trade Openness ◽  
Capita Gross Domestic Product ◽  
Model Stability ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Net Flows ◽  
Yearly Data

The present study attempts to develop a co-integrating relationship between foreign direct investment (FDI) net inflows into India and its economic growth for the calendar period 1986–2016 by taking log-transformed yearly data. The variables included in the study were per capita gross domestic product (GDP; as a measure of economic growth) and FDI net flows. Additional regressors as control variables include exports as a percentage of GDP (a proxy for trade openness) and call money rate (a proxy for financial variable). The methodology employed is autoregressive distributed lag (ARDL) bounds partial F-test. The results of the study show a positive co-integrating relation between FDI and GDP as given by computed F-value after controlling for other factors impacting growth. The long-run model also satisfied the necessary prerequisites of the model, such as variable stationarity, no serial correlation, and model stability. The lagged error correcting mechanism (ECM) was negative, stable, and significant; however, pace of adjustment was found to be at a slow rate of 7.6 percent per period (per annum).

Trade openness, financial liberalization and economic growth

2017 ◽  
Vol 6 (3) ◽  
pp. 229-246 ◽  
Author(s):  
Rana Muhammad Adeel-Farooq ◽  
Nor Aznin Abu Bakar ◽  
Jimoh Olajide Raji
Keyword(s):  
Economic Growth ◽  
Financial Liberalization ◽  
Positive Impact ◽  
Trade Openness ◽  
Principal Component ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Comparison Of The Results

Purpose The purpose of this paper is to empirically examine the effects of financial liberalization and trade openness on the economic growth of two countries, namely, Pakistan and India for the period 1985-2014. Design/methodology/approach This study uses the autoregressive distributed lag technique, which allows mixed order of integration. In addition, it uses the principal component method to create an index for financial liberalization to examine how it affects the economic growth of the selected countries. Findings The findings reveal that in the short and long run, trade openness has positive effect on the Pakistan’s economic growth while the financial liberalization has positive impact only in the long run. In the case of India, both financial liberalization and trade openness positively and significantly influence the economic growth in the short and long run. Practical implications By comparing the results of both countries, trade openness and financial liberalization increase the economic growth of India more than that of Pakistan. These results suggest that Pakistan should consider appropriate positive policies regarding financial liberalization and trade openness to achieve high and stable economic growth in the future. Originality/value This study creates financial liberalization index by using the principal component analysis method to explain the role of financial liberalization in the economic growth of Pakistan and India. In addition, it makes comparison of the results based on which country benefits most from the liberalization of trade and financial sectors. Only very few studies have examined these countries, yet their results have remained inconclusive as well.

scholarly journals Revisiting the Contribution of Islamic Banks’ Financing to Economic Growth: The Indonesian Experience

2021 ◽  
Vol 6 (1) ◽  
Author(s):  
Indri Supriani ◽  
Bayu Arie Fianto ◽  
Najim Nur Fauziah ◽  
Ryan Rahmah Maulayati
Keyword(s):  
Economic Growth ◽  
Trade Openness ◽  
Substantial Contribution ◽  
Islamic Banks ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Lag Model

The contribution of Islamic banking towards economic growth remains debatable amongst academicians and practitioners. This study investigates the relationship between Islamic banks’ financing and economic growth in Indonesia which is the largest Muslim population country. This study adopts Autoregressive-Distributed Lag (ARDL) and utilizes time-series quarterly data from 2011Q1 to 2019Q3. The study uses four predictors: financing to deposit ratio; inflation; gross capital fixed formation; and trade openness. The results from the auto-regressive distributed lag model indicate that, in the long-run, Islamic banks' financing has a significant impact on the Indonesian economy. However, in the short-run, financing does not make a substantial contribution to Indonesian economic growth. The study’s key implication is that financing by Islamic banks still makes a limited contribution to economic growth in Indonesia. This study enhances the literature review, specifically on evaluating the contribution of Islamic banks towards economic growth. Numerous existing studies on this topic covering the crisis period data, which might suffer from data bias. Therefore, this study addresses this topic, excluding the global financial crises period such as 1998, 2008, and 2020, to demonstrate Islamic banks' evident contribution to Indonesian economic growth.

scholarly journals Consequences of Capital formation, Trade Liberalization on the Economic Growth: Pakistan’s Experience

2015 ◽  
Vol 2 (1) ◽  
pp. 1-4
Author(s):  
Nadia Bukhari ◽  
Anjum Iqbal
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Trade Openness ◽  
Capital Formation ◽  
Vital Role ◽  
Series Data ◽  
Distributed Lag ◽  
Long Run ◽  
Auto Regressive ◽  
Adf Test

This study considers the long run relationship between the liberalization of trade, capital formation and the economic growth of Pakistan by using the time series data from 1975-2013. The main aim of this study is to examine that how much liberalization of trade and capital formation affects the economic growth of Pakistan in long run. The approach that has been used for empirical analysis is Auto Regressive Distributed Lag (ARDL) model. Under the ADF test capital formation (CF) is stationary at its first level but the trade openness (TO) and GDP is stationary at its first difference. Moreover, the granger casualty test is evident that there become a casual relationship between the trade openness and GDP. The result of this study shows that both the trade openness and the capital formation determined the economic growth in long run and they both have statistically significant effect on the GDP. Furthermore it has has been depicted from the study that the trade has a vital role to influence the economic growth.

scholarly journals The Impact of Industrialization, Trade Openness, Financial Development, and Energy Consumption on Economic Growth in Indonesia

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 174
Author(s):  
Khalid Eltayeb Elfaki ◽  
Rossanto Dwi Handoyo ◽  
Kabiru Hannafi Ibrahim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Least Squares ◽  
Financial Development ◽  
Correction Term ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

This study aimed to scrutinize the impact of financial development, energy consumption, industrialization, and trade openness on economic growth in Indonesia over the period 1984–2018. To do so, the study employed the autoregressive distributed lag (ARDL) model to estimate the long-run and short-run nexus among the variables. Furthermore, fully modified ordinary least squares (FMOLS), dynamic least squares (DOLS), and canonical cointegrating regression (CCR) were used for a more robust examination of the empirical findings. The result of cointegration confirms the presence of cointegration among the variables. Findings from the ARDL indicate that industrialization, energy consumption, and financial development (measured by domestic credit) positively influence economic growth in the long run. However, financial development (measured by money supply) and trade openness demonstrate a negative effect on economic growth. The positive nexus among industrialization, financial development, energy consumption, and economic growth explains that these variables were stimulating growth in Indonesia. The error correction term indicates a 68% annual adjustment from any deviation in the previous period’s long-run equilibrium economic growth. These findings provide a strong testimony that industrialization and financial development are key to sustained long-run economic growth in Indonesia.

scholarly journals Does the Export-Led Growth Hypothesis Hold for Services Exports in Emerging Economies?

2021 ◽  
Vol 14 (27) ◽  
pp. 63-75
Author(s):  
Okpeku Lilian ONOSE ◽  
◽  
Osman Nuri ARAS ◽  
Keyword(s):  
Economic Growth ◽  
Emerging Economies ◽  
Emerging Countries ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Per Capita ◽  
Positive Effect ◽  
Growth Hypothesis

The export-led growth hypothesis states a positive relationship between the growth of exports and long-run economic growth. This study examines the validity of the export-led growth hypothesis of services exports in 5 emerging economies, including Brazil, India, Nigeria, China, and South Africa (BINCS), for the period of 1980-2019. The study employs the panel mean group autoregressive distributed lag (ARDL) procedure to identify a causal relationship between services exports and gross domestic product (GDP) per capita. The findings show that the export-led growth hypothesis in services only has a positive effect on economic growth in the short run while other variables, including foreign direct investment (FDI), gross capital formation, and labour, increase economic growth in the long run. Hence, the emerging countries should focus more on internal investment to boost growth in the long and short run.

Nexus between Openness to Trade and Economic Growth: An Empirical Investigation of Afghanistan

2019 ◽  
Vol 20 (2) ◽  
pp. 205-223
Author(s):  
Nassir Ul Haq Wani
Keyword(s):  
Economic Growth ◽  
Trade Openness ◽  
Decomposition Analysis ◽  
Developed Countries ◽  
Least Square ◽  
Capital Goods ◽  
Promotion Strategy ◽  
Distributed Lag ◽  
Long Run ◽  
Volume Of Trade

The notion that the international trade is the foundation of economic growth dates long back, and even now, an irresistible body of literature confirms a strong and positive link between trade openness and economic growth. However, most of these studies are focused on developed countries. Indeed literature from developing countries are scant, those from under developed and a landlocked country like Afghanistan are almost non-existent. This article endeavours to innovatively scrutinize the relationship between trade liberalization and economic growth in Afghanistan, using biannual data for the period 1995–2016 and thus evaluates the comparative effect of three different measures of trade openness on the economic growth by using more rigorous econometric techniques. Autoregressive distributed lag (ARDL) method, JJ CO-integration and ordinary least square (OLS) results suggest significant positive long-run relationship between export and economic growth. In contrast, total volume of trade and imports have significant negative effect on the economic growth. The addition of variables and results of fully modified OLS suggest that the results are robust. The Granger causality and variance decomposition analysis indicate the unidirectional causality between trade openness and economic growth. In export model, causality runs from export to growth. Whereas, in the model with total volume of trade and import, causality runs from growth to total volume of trade and imports in Afghanistan. From the findings, it is concluded that the policymakers should focus on export promotion strategy to enhance the economic growth in Afghanistan. Besides, efficient utilization of capital goods should be ensured and reliance on non-capital goods should be less in order to ensure high domestic production in the country. JEL: F10, F43, C22

SHORT-RUN AND LONG-RUN IMPACT OF INFLATION, UNEMPLOYMENT, AND ECONOMIC GROWTH TOWARDS POVERTY IN INDONESIA: ARDL APPROACH

2019 ◽  
Vol 2 (1) ◽  
pp. 15
Author(s):  
Ahmadi Murjani
Keyword(s):  
Economic Growth ◽  
Poverty Alleviation ◽  
Macroeconomic Variables ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
The Government ◽  
The Impact

 Poverty alleviation has become a vigorous program in the world in recent decades. In line with the efforts applied by the government in various countries to reduce poverty, some evaluations have been practised. The impacts of macroeconomic variables such as inflation, unemployment, and economic growth have been commonly employed to be assessed for their impact on the poverty. Previous studies in Indonesia yielded mix results regarding the impact of such macroeconomic variables on the poverty. Different methods and time reference issue were the suspected causes. This paper aims to overcome such problem by utilising the Autoregressive Distributed Lag (ARDL) equipped with the latest time of observations. This paper finds in the long-run, inflation, unemployment, and economic growth significantly influence the poverty. In the short-run, only inflation and economic growth are noted affecting poverty significantly. 

scholarly journals DO INFORMATION AND COMMUNICATION TECHNOLOGIES FOSTER ECONOMIC GROWTH IN INDONESIA?

2019 ◽  
Vol 22 (1) ◽  
pp. 103-122
Author(s):  
Badri Narayan Rath ◽  
Danny Hermawan
Keyword(s):  
Economic Growth ◽  
Information And Communication Technologies ◽  
Communication Technologies ◽  
Annual Data ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Information And Communication ◽  
Ict Development

This paper investigates, using annual data from 1980 to 2014, whether adoption of information and communication technologies (ICT) fosters economic growth in Indonesia. We employ an Autoregressive Distributed Lag cointegration technique on an augmented neoclassical growth model. The empirical results indicate a positive effect of ICT development on economic growth in both the long-run and short-run. The other regressors, such as total factor productivity, human capital, and capital per worker, also positively affect economic growth. From a policy perspective, the Indonesian government should promote ICT development through greater investment.

scholarly journals Capital Market and Economic Growth in Nigeria: An Autoregressive Distributed Lag (ARDL) Bounds Testing Approach

2021 ◽  
Vol 1 (2) ◽  
Author(s):  
Panan Danladi Gwaison ◽  
Livinus Nkuri Maimako ◽  
Pokyes Shekara Mwolchet
Keyword(s):  
Economic Growth ◽  
Capital Market ◽  
Stock Exchange ◽  
Series Data ◽  
Fair Trading ◽  
Market Capitalization ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
The Capital Market

The role of the capital market in the growth and development of any economy need not be over-emphasized. The capital market is a complex institution and mechanisms through which economic units desirous to invest their surplus fund, interact directly or through financial intermediaries with those who wish to procure funds for their businesses. The Nigerian capital market started operations in mid-1961 with eight stocks and equities; with about seven United Kingdom (UK) firms quoted on the Nigerian Stock Exchange (NSE) which had, at the same time, dual quotations on the London Stock Exchange. This study examined the impact of the capital market on economic growth in Nigeria from 1981 to 2018. The expo facto research design was adopted for this study. The time-series data for the study were sourced from CBN statistical bulletin. Autoregressive Distributed Lag (ARDL) was used with the aid of e-view 10 software. The ARDL Bounds test revealed the existence of a long-run relationship among the variables. The result revealed that market capitalization has positive and insignificant effects on economic growth both in the short and long run. There is unidirectional causality among the variables.  The study recommended that regulatory authorities should restore confidence in the market by ensuring transparency and fair trading dealings and transactions in the market to enhance economic growth. There should be an improvement in the moribund market capitalization, by encouraging more foreign investors to participate in the market, maintain a state of the art technology like automated trading and settlement practices, electronic fund clearance, and eliminate physical transfer of shares.

scholarly journals Workers’ Remittances in Yemen: Macroeconomic Determinants and Impact on Economic Growth

2021 ◽  
Author(s):  
Essa A. Alhannom ◽  
Ghaleb S. Mushabeb
Keyword(s):  
Economic Growth ◽  
Planning Process ◽  
Host Countries ◽  
Macroeconomic Conditions ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Inflation Rates ◽  
Macroeconomic Determinants ◽  
The Impact

This study aims to examine the determinants of workers’ remittances and their impact on economic growth in Yemen. Autoregressive Distributed Lag (ARDL) bounds test to co-integration and error correction model (ECM) were applied on data covering the period from 1990 to 2014. According to the model of remittances determinants, workers’ remittances in Yemen respond to the macroeconomic conditions of both the home and host countries. It is found that, in the long-run, migrant stock and income level at the host countries are positively and strongly influence remittances level, with a feeble impact of domestic inflation rates. The effect of the home country’s income seems to be positive but insignificant in explaining the behavior of remittances level. The model of economic growth suggests that, in the long-run,  the impact of workers’ remittances appears to be positive and moderate with positive and stronger influences observed for financial development and official development assistance. Accordingly, it is recommended that a lesser weight should be given to remittances in the strategic planning process, taking into consideration the increasing potentials of the conditions in the neighboring host countries to be changed. In addition, using remittances as a means of economic growth can be enhanced by encouraging migrants to direct their savings towards productive investment activities, and via formal channels.

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