The Dynamic Relationship Between Financial Development, Economic Growth, Foreign Direct Investment and Trade Openness: Evidence from South Asian Countries

IF 1.3 Q1 AREA STUDIES

Millennial Asia Pub Date : 2023-01-11 DOI:10.1177/09763996221138465

Ghulam Mustafa

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引用次数: 4

Abstract

This study examines the nature of the association among financial development, economic growth, foreign direct investment and trade openness in four South Asian countries from the period 1990–2019. The study employed Granger Causality test in Vector Error Correction Model (VECM) framework to find out the dynamic relationship among the variables. Further, variance decomposition analysis (VDA) and impulse response function (IRF) is also applied to determine the relationships among the variables beyond the sample period. The empirical result shows support for growth-led financial development, growth-led foreign direct investment and growth-led trade openness hypothesis for India. For Pakistan, the results suggest growth-led financial development and growth-led foreign direct investment. In the case of Sri Lanka, the results suggest foreign direct investment-led growth and trade openness-led growth hypothesis. The results do not support any kind of causal relationship among the variables in the case of Bangladesh in the short run. Furthermore, no bidirectional causality among the variables was found for all the countries. The findings imply that all four countries should adopt policies to promote further trade liberalization, financial sector development and also need to fast-track reforms to improve the investment climate and attract investments to attain high economic growth in the long run.

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金融发展、经济增长、外国直接投资与贸易开放的动态关系——来自南亚国家的证据

本研究考察了1990-2019年期间四个南亚国家的金融发展、经济增长、外国直接投资和贸易开放之间的关联性质。本研究采用向量误差校正模型（VECM）框架中的Granger因果关系检验来找出变量之间的动态关系。此外，方差分解分析（VDA）和脉冲响应函数（IRF）也被应用于确定样本周期之外的变量之间的关系。实证结果支持印度以增长为导向的金融发展、以增长为主导的外国直接投资和以增长为引领的贸易开放假说。对巴基斯坦来说，研究结果表明，增长主导的金融发展和增长主导的外国直接投资。以斯里兰卡为例，研究结果表明，外国直接投资主导的增长和贸易开放主导的增长假说。从短期来看，这些结果不支持孟加拉国案例中变量之间的任何因果关系。此外，没有发现所有国家的变量之间存在双向因果关系。调查结果表明，这四个国家都应该采取政策，促进进一步的贸易自由化和金融部门发展，还需要加快改革，以改善投资环境，吸引投资，从长远来看实现高经济增长。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Millennial Asia AREA STUDIES-

CiteScore

4.50

自引率

12.50%

发文量

期刊介绍： Millennial Asia: An International Journal of Asian Studies is a multidisciplinary, refereed biannual journal of the Association of Asia Scholars (AAS)–an association of the alumni of the Asian Scholarship Foundation (ASF). It aims to encourage multifaceted, multidisciplinary and interdisciplinary research on Asia, in order to understand its fast changing context as a growth pole of global economy. By providing a forum for Asian scholars situated globally, it promotes dialogue between the global academic community, civil society and policy makers on Asian issues. The journal examines Asia on a regional and comparative basis, emphasizing patterns and tendencies that go beyond national borders and are globally relevant. Modern and contemporary Asia has witnessed dynamic transformations in cultures, societies, economies and political institutions, among others. It confronts issues of collective identity formation, ecological crisis, rapid economic change and resurgence of religion and communal identifies while embracing globalization. An analysis of past experiences can help produce a deeper understanding of contemporary change. In particular, the journal is interested in locating contemporary changes within a historical perspective, through the use of interdisciplinary and multidisciplinary approaches. This way, it hopes to promote comparative studies involving Asia’s various regions. The journal brings out both thematic and general issues and the thrust areas are: Asian integration, Asian economies, sociology, culture, politics, governance, security, development issues, arts and literature and any other such issue as the editorial board may deem fit. The core fields include development encompassing agriculture, industry, regional trade, social sectors like health and education and development policy across the region and in specific countries in a comparative perspective.