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Panel Cointegration and Granger Causality Approach to Foreign Direct Investment and Economic Growth in BRICS Countries

Author

Listed:
  • Aderemi Timothy Ayomitunde

    (Olabisi Onabanjo University)

  • Adebayo Abiola Geogina

    (Wageningen University and Research)

  • Jolayemi Lydia Bose

    (Kings University)

  • Kalejaiye Toluwanimi Grace

    (Tai Solarin University of Education)

Abstract

The aim of this study is to investigate the relationship between foreign direct investment and economic growth in BRICS countries. Past empirical studies have failed to examine the long run relationship between FDI, growth rate and economic growth in these countries, which has created a gap in the literature. Data was collected from the United Nations Conference on Trade and Development and World Bank Indicator from 1990– 2017 and the Johansen Fisher Panel Cointegration and Pairwise Dumitrescu Hurlin Panel Causality Tests were employed to estimate the model. In the model, RGDP is used to proxy economic growth meanwhile Foreign Direct Investment and the Growth Rate as proxies for other macroeconomic variables. Consequently, the empirical results show that foreign direct investment, growth rate and economic growth have a long run equilibrium relationship. Also, there is an existence of unidirectional causality which runs from FDI to economic growth. Based on these findings, this paper recommends that the policy makers in BRICS countries should embark on more foreign investment oriented policies that would boost further attraction of FDI inflows into their economies. This will in the long run ensure the sustainable growth rate of BRICS economies.

Suggested Citation

  • Aderemi Timothy Ayomitunde & Adebayo Abiola Geogina & Jolayemi Lydia Bose & Kalejaiye Toluwanimi Grace, 2019. "Panel Cointegration and Granger Causality Approach to Foreign Direct Investment and Economic Growth in BRICS Countries," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 15(2), pages 236-248, APRIL.
    • Handle: RePEc:dug:actaec:y:2019:i:2:p:236-248
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