Impact of FDI and Electricity on the Economic Growth of Pakistan: A Long Run Cointegration and Causality Analysis

Since the 1980s, analysts have been debating the effect of foreign direct investment (FDI) and electricity consumption (EC) on the economic growth (GDP) of developing countries. The purpose of the study is to estimate the long-run relationship between FDI, electricity consumption and GDP of Pakistan for the period of 1971 to 2017, using ARDL bounds testing, FMOLS and Canonicals cointegration regression. For causality analysis, the study uses a VECM approach for short-run causality directions and MWALD/Toda Yamamoto approach for the long-run causality directions. The cointegration results of all the approaches state that there exists a positive and significant long-run relationship between the concerned variables. The impact of electricity consumption on economic growth is very strong as compared to FDI. Moreover, in the short-run, there is a unidirectional causality running from FDI to GDP and GDP to EC. In the long-run causality, the study finds unidirectional causality for FDI and bidirectional causality for EC with GDP.

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Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries

Journal of Risk and Financial Management ◽

10.3390/jrfm12040176 ◽

2019 ◽

Vol 12 (4) ◽

pp. 176 ◽

Cited By ~ 3

Author(s):

Trang Thi-Huyen Dinh ◽

Duc Hong Vo ◽

Anh The Vo ◽

Thang Cong Nguyen

Keyword(s):

Economic Growth ◽

Developing Countries ◽

Foreign Direct Investment ◽

Private Sector ◽

Money Supply ◽

Direct Investment ◽

Global Financial Crisis ◽

Long Run ◽

Short Run ◽

The Impact

A contribution of foreign direct investment to economic growth is possibly one of the widely examined topics in academic research in the last five decades. However, few studies have examined both the short run and long run impacts of this effect concurrently for developing and emerging markets, in particular during the period of economic turmoil that includes the global financial crisis. As such, this paper examines and provides additional and relevant quantitative evidence on the impact of foreign direct investment (FDI) on economic growth, both in the short run and the long run in developing countries of the lower-middle-income group in 2000–2014. Various econometric methods are employed such as the panel-based unit root test, Johansen cointegration test, Vector Error Correction Model (VECM), and Fully Modified OLS (FMOLS) to ensure the robustness of the findings. The results of this study show that FDI helps stimulate economic growth in the long run, although it has a negative impact in the short run for the countries in this study. Other macroeconomic factors also play an important role in explaining economic growth in these countries. Money supply has a positive effect on growth in the short run while total credit for private sector has a negative effect. In addition, long-run economic growth is driven by money supply, human capital, total domestic investment, and domestic credit for the private sector. Based on these results, recommendations for the governments of these countries have been developed.

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Economic Development, CO2 Emissions and Energy Use Nexus-Evidence from the Danube Region Countries

Energies ◽

10.3390/en14113165 ◽

2021 ◽

Vol 14 (11) ◽

pp. 3165

Author(s):

Eva Litavcová ◽

Jana Chovancová

Keyword(s):

Economic Growth ◽

Energy Consumption ◽

Co2 Emissions ◽

Carbon Emissions ◽

Bounds Testing ◽

Mutual Cooperation ◽

Long Run ◽

Short Run ◽

Danube Region ◽

The Impact

The aim of this study is to examine the empirical cointegration, long-run and short-run dynamics and causal relationships between carbon emissions, energy consumption and economic growth in 14 Danube region countries over the period of 1990–2019. The autoregressive distributed lag (ARDL) bounds testing methodology was applied for each of the examined variables as a dependent variable. Limited by the length of the time series, we excluded two countries from the analysis and obtained valid results for the others for 26 of 36 ARDL models. The ARDL bounds reliably confirmed long-run cointegration between carbon emissions, energy consumption and economic growth in Austria, Czechia, Slovakia, and Slovenia. Economic growth and energy consumption have a significant impact on carbon emissions in the long-run in all of these four countries; in the short-run, the impact of economic growth is significant in Austria. Likewise, when examining cointegration between energy consumption, carbon emissions, and economic growth in the short-run, a significant contribution of CO2 emissions on energy consumptions for seven countries was found as a result of nine valid models. The results contribute to the information base essential for making responsible and informed decisions by policymakers and other stakeholders in individual countries. Moreover, they can serve as a platform for mutual cooperation and cohesion among countries in this region.

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Dynamic Causal Relationships among GDP, Exports, and Foreign Direct Investment (FDI) in the Developing Countries

International Letters of Social and Humanistic Sciences ◽

10.18052/www.scipress.com/ilshs.14.1 ◽

2013 ◽

Vol 14 ◽

pp. 1-19 ◽

Cited By ~ 3

Author(s):

Mohsen Mehrara ◽

Amin Haghnejad ◽

Jalal Dehnavi ◽

Fereshteh Jandaghi Meybodi

Keyword(s):

Economic Growth ◽

Developing Countries ◽

Foreign Direct Investment ◽

Strong Evidence ◽

Direct Investment ◽

The Other ◽

Fdi Inflows ◽

Long Run ◽

Short Run ◽

Growth Hypothesis

Using panel techniques, this paper estimates the causality among economic growth, exports, and Foreign Direct Investment (FDI) inflows for developing countries over the period of 1980 to 2008. The study indicates that; firstly, there is strong evidence of bidirectional causality between economic growth and FDI inflows. Secondly, the exports-led growth hypothesis is supported by the finding of unidirectional causality running from exports to economic growth in both the short-run and the long-run. Thirdly, export is not Granger caused by economic growth and FDI inflow in either the short run or the long run. On the basis of the obtained results, it is recommended that outward-oriented strategies and policies of attracting FDI be pursued by developing countries to achieve higher rates of economic growth. On the other hand, the countries can increase FDI inflows by stimulating their economic growth.

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Research publications and economic growth in South Africa: an empirical investigation

International Journal of Social Economics ◽

10.1108/ijse-05-2014-0103 ◽

2016 ◽

Vol 43 (7) ◽

pp. 662-675

Author(s):

Nicholas M Odhiambo ◽

Lydia Ntenga

Keyword(s):

Economic Growth ◽

South Africa ◽

Causal Relationship ◽

Series Data ◽

Bounds Testing ◽

Content Type ◽

Research Publications ◽

Long Run ◽

Ardl Bounds Testing ◽

Short Run

Purpose – The purpose of this paper is to examine the causal relationship between research publications and economic growth – using time-series data from South Africa. The paper attempts to answer two critical questions: is there a long-run relationship between research publications and economic growth in South Africa? Do research publications from South African researchers Granger-cause economic growth? Design/methodology/approach – Unlike some of the previous studies, the current paper uses a trivariate ECM-based Granger-causality model to examine this linkage. Specifically, the study incorporates education as an intermittent variable between research and economic growth. In addition, the paper uses the recently developed autoregressive distributed lag (ARDL)-bounds testing procedure, which has numerous advantages, especially when the sample size is small. Findings – The results of this study show that there is a long-run relationship between research publications and economic growth in South Africa. The results also show that there is a distinct causal flow from research publications to economic growth in South Africa. This applies both in the short-run and in the long-run. Other results also show that: there is a short-run bidirectional causality between research publications and education; and there is a short-run bi-directional causality between education and economic growth, but a long-run unidirectional causal flow from education to economic growth. Practical implications – The findings of this paper underscore the crucial role that research plays in economic growth and development. Overall, the findings of this study show that research in South Africa is pro-growth. This implies that the recent significant increase in government expenditure on research and innovation, which is aimed at increasing the country’s scientific research outputs, is likely to pay off. Originality/value – To the best of the authors’ knowledge, this paper is the first of its kind to examine in detail the dynamic causal relationship between research outputs and economic growth in South Africa – using the recently developed ARDL-bounds testing approach within a trivariate setting.

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How do Globalization, Technological Change and Employment Impact Economic Growth in Developing Countries? Evidence from Panel Data Analysis

Review of Applied Management and Social Sciences ◽

10.47067/ramss.v1i1.9 ◽

2018 ◽

Vol 1 (1) ◽

pp. 39-49

Author(s):

Fatima Saleem ◽

Fatima Farooq ◽

Imran Sharif Chaudhry ◽

Noreen Safdar

Keyword(s):

Economic Growth ◽

Developing Countries ◽

Developing Economies ◽

Panel Data Analysis ◽

Trade Openness ◽

Causality Analysis ◽

Causality Test ◽

Panel Ardl ◽

Long Run ◽

The Impact

This study aims at exploring the impact of globalization, technology and employment on economic growth of developing economies. This study also observed the long-run, short-run and causality relationships between globalization, technological innovations, employment, and economic growth for 20 selected developing countries covering the data for period of 1991 to 2017. Since stationary of variables is examined through ADF tests, Levin-Lin-Chu test, and IM-Pesaran-Shin test and resulted with mixed order of integration, Panel ARDL estimation techniques are employed to measure the long run effects of these variables on growth of selected economies. Dumitrescu-Hurlin panel Granger Causality test was applied for causality analysis. All variables have strong positive and significant relationship with growth. This study concluded that knowledge and research-based education have a key role in promoting long-run growth as evident from the ‘New growth theory’ of Romer. On the basis of these results, it is suggested that knowledge and research-based education should be promoted and export-oriented policies should also be encouraged to attain benefits of trade openness and globalization for accelerating economic growth on sustainable basis.

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R&D Expenditure R&D Expenditure as an Accelerator of Economic Growth with Special Reference to Developing Countries

Journal of Business and Social Review in Emerging Economies ◽

10.26710/jbsee.v7i3.1842 ◽

2021 ◽

Vol 7 (3) ◽

Author(s):

Tariq Mahmood Ali ◽

Adiqa Kausar Kiani ◽

Tariq Bashir ◽

Talah Numan Khan

Keyword(s):

Economic Growth ◽

Developing Countries ◽

Developing Economies ◽

Positive Association ◽

Estimation Model ◽

Panel Ardl ◽

Long Run ◽

Short Run ◽

The Impact ◽

D Investment

Purpose: In this network age, among the other factors which increase economic growth, the R&D activities, a pivotal and effective factor, carried out by a country. The present study attempts to investigate the empirical R&D expenditure-economic growth nexus in developing and developed economies, and also provides useful insight about how R&D investment works to enhance the economic growth of a country. Design/Methodology/Approach: In this regard, 21 years data of top 100 economies of the world from 1995 to 2015 has been utilized. The Panel ARD Model approach has been preferred to explore the impact of R&D investment on economic growth (GDP). For construction of the estimation model, five different variables are used. In order to accomplish the results, along with analysing the data of 100 countries a whole, analysis has also been made by dividing countries into different categories and groups. Overall, the Panel ARDL test has been performed on nine different groups of countries. Findings: The results reveal that, ceteris paribus, there is a strong positive association between R&D expenditure and economic growth (GDP) in the long-run; 1% increase in GERD leads to 0.07% increase in GDP. However, the impact in the developing countries (0.043%) is lower compared to the developed OECD countries (0.27%). No impact of the R&D expenditure on economic growth is observed in the short-run. Implications/Originality/Value: The study presents some thought-provoking ideas, policy recommendations and implications for the policy makers, planners and researchers, especially in the context of developing economies.

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Examining the impact of Exports and Exchange rate on Economic Growth of Turkey

10.21203/rs.3.rs-57469/v1 ◽

2020 ◽

Author(s):

Iftikhar Muhammad ◽

Malik Shahzad Shabbir

Keyword(s):

Economic Growth ◽

Foreign Direct Investment ◽

Exchange Rate ◽

Granger Causality ◽

Direct Investment ◽

Economic Policies ◽

Long Run ◽

Short Run ◽

Auto Regressive ◽

The Impact

Abstract Purpose This study intends to analyze the long-run and short-run relationships along with the identification of causal links between exports, economic growth, and exchange rate in Turkey. Data/Design: This study uses auto-regressive distributed lags (ARDL) and Granger causality over time series monthly data from the year 2010–2018. The results indicate that exports are significantly positively related to economic growth while the exchange rate is found to be negatively related to economic growth. Findings: Moreover, findings from the test of Granger causality indicate that a unidirectional causal association is found from exports to foreign direct investment and economic growth and from economic growth to foreign direct investment. The Granger causality results indicate that an increase in exports accelerates the economic growth of Turkey and a change in growth rate and exchange rate leads to a change in foreign direct investment. Originality of work: The overall findings suggest that exports should be promoted along with the liberal-investment economic policies to boost the overall economic growth in Turkey.

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Foreign Direct Investment, Financial Development, and Economic Growth Nexus in Bangladesh

The American Economist ◽

10.1177/0569434520938673 ◽

2020 ◽

pp. 056943452093867

Author(s):

Md. Noman Siddikee ◽

Mohammad Mafizur Rahman

Keyword(s):

Economic Growth ◽

Foreign Direct Investment ◽

Financial Development ◽

Direct Investment ◽

Banking Sector ◽

Negative Impact ◽

Capital Formation ◽

Long Run ◽

Short Run ◽

The Impact

This article aims to explore the short- and long-run impact of foreign direct investment (FDI), financial development (FD), capital formation, and the labor forces on the economic growth of Bangladesh. We applied the Granger causality test and Vector Error Correction Model (VECM) for this study. The World Bank data for the period of 1990–2018 are taken into account for the analysis. Our findings suggest, in the long run, capital formation has a positive impact, and in the short run, it has a negative impact on gross domestic product (GDP) implying a lack of higher efficiency is persisting in capital management. Similarly, labor forces have an insignificant impact in the short run and a negative impact in the long run on GDP, which confirms the presence of a huge number of unskilled laborers in the economy with inefficient allocation. The impact of FD is found tiny positive in the short run but large negative in the long run on GDP indicating vulnerability of banking sector. These also confirm fraudulence and inefficient use of the domestic credit supplied to the private sector. The impact of FDI is approximately null both in the short and long run, indicating Bangladesh fails to achieve the long-term benefits of FDI. Finally, this study suggests using FDI more in the capital intensive project of the public–private partnership venture than infrastructural development only and also improving the credit management policy of the banking sector. JEL Classifications: F21, F43, J21

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Electricity Consumption–Economic Growth Nexus: Evidence from ARDL Bound Testing Approach in the Tunisian Context

Global Business Review ◽

10.1177/0972150920925431 ◽

2020 ◽

pp. 097215092092543 ◽

Cited By ~ 1

Author(s):

Zouheir Mighri ◽

Hanen Ragoubi

Keyword(s):

Economic Growth ◽

Electricity Consumption ◽

Bounds Testing ◽

Distributed Lag ◽

Autoregressive Distributed Lag ◽

Long Run ◽

Causality Tests ◽

Short Run ◽

Testing Approach ◽

Causal Nexus

This article investigates the causal nexus between electricity consumption and economic growth in Tunisia for the period 1971–2013 by using autoregressive distributed lag (ARDL) bounds testing approach of cointegration and Granger causality tests. The empirical findings indicate the existence of a long-term relationship between electricity consumption and economic growth. Besides, they support the conservation hypothesis in the long run, while they confirm the growth hypothesis in the short run.

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The Impact of Human Capital and Foreign Direct Investment on Economic Growth: An Empirical Study on Jordan

Business and Economic Research ◽

10.5296/ber.v10i2.16747 ◽

2020 ◽

Vol 10 (2) ◽

pp. 182

Author(s):

Mustafa Mohammad Alalawneh

Keyword(s):

Economic Growth ◽

Human Capital ◽

Foreign Direct Investment ◽

Direct Investment ◽

Advanced Technology ◽

Bounds Testing ◽

Long Run ◽

Auto Regressive ◽

Human Capital Index ◽

The Impact

Human capital is a real factor in improving the investment climate and attracting foreign investment. FDI also increases human capital in the host country through the transfer of advanced technology and the rehabilitation of local labor. The importance of the study comes from Jordan's serious endeavor to attract foreign direct investment and to present itself as a rich country in human and qualified capacities. This study examines the effect of human capital and foreign direct investment on economic growth in Jordan employing Auto Regressive Distributed Lags Bounds Testing (ARDL BT) co-integration method for the spanning period from 1984 to 2018. The results indicate that there is a long- run relationship among variables. The results showed that there is a negative and statistically significant effect of human capital index (HCI) on economic growth (GWP) in the long run, and a positive and statistically significant effect of FDI (GFDI) on economic growth (GWP) in the long run. The estimation results indicate that a 1% increase in (HCI) decreases (GWP) by 0.272%, and a 1% increase in (GFDI) increases (GWP) by 0.006%. This study is one of the few studies that highlight the challenges facing both HC and FDI in increasing economic growth in Jordan and provides some recommendations.

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