Article Sidebar

Submitted
June 6, 2022
Accepted
October 28, 2022
Published
October 28, 2022
Download
Full text PDF
Statistic
Read Counter : 1228 Download : 1154

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose ― The main objective is to examine the effects of foreign direct investment and trade openness on economic growth (SDG-8.1) about economic growth amid crises in 30 Asian economies.


Design/methodology/approach ― The effects of FDI and trade openness on economic growth in the Asian region are examined using the fixed-effects model, panel corrected standard errors (PCSE), and generalized method of moments (GMM) estimations. The study also measures the long-run effects of the estimates and the granger causality tests.


Findings ― The findings revealed that both FDI and trade openness contribute to boosting economic growth in Asian economies, and the effect is also persistent in the long run. We also find that the Asian and global financial collapse shocks in 1997-1998 and 2008-2009, respectively, adversely affected the region's economic growth. Additionally, the economic growths of some Asian countries are below the targeted level set in SDG-8.1. 


Practical implications ― The Asian countries should adopt appropriate policy measures for encouraging the inflow of FDI and cross-border trade of goods and services as it is evident that the inflow of FDI and open trade will improve local human capital and technological capabilities of the industries, which will ultimately help to enhance stable economic growth.


Originality/value ― This study is unique in accompanying the Asian financial crisis and world recession in studying the effects of FDI and trade openness on SDG-8.1 in Asian economies. 

Keywords

Asian Economies Foreign Direct Investment (FDI) Economic Growth

Article Details

License

Copyright (c) 2022 Rabiul Hossain

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).

Creative Commons License

Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Author Biography

Rabiul Hossain, Bangladesh Bank, Dhaka, Bangladesh

Deputy Director, Bangladesh Bank, Dhaka, Bangladesh

How to Cite
Hossain, R., Roy, C. K., & Akter, R. . (2022). The effects of foreign direct investment and trade openness on economic growth amid crises in Asian economies. Economic Journal of Emerging Markets, 14(2), 231–243. https://doi.org/10.20885/ejem.vol14.iss2.art7
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Acharyya, J. (2009). FDI, growth and the environment: Evidence from India on CO2 emission during the last two decades. Journal of Economic Development, 34(1), 43–58. https://doi.org/10.35866/caujed.2009.34.1.003
  2. Afonso, A., & Blanco-Arana, M. C. (2022). Financial and economic development in the context of the global 2008-09 financial crisis. International Economics, 169, 30–42. https://doi.org/10.1016/j.inteco.2021.11.006
  3. Ahmed, E. M. (2012). Are the FDI inflow spillover effects on Malaysia’s economic growth input driven? Economic Modelling, 29(4), 1498–1504. https://doi.org/10.1016/j.econmod.2012.04.010
  4. Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2010). Does foreign direct investment promote growth? Exploring the role of financial markets on linkages. Journal of Development Economics, 91(2), 242–256. https://doi.org/10.1016/j.jdeveco.2009.09.004
  5. Arabiyat, T. S., Mdanat, M., & Samawi, G. (2020). Trade openness, inclusive growth, and inequality: Evidence from Jordan. The Journal of Developing Areas, 54(1). https://doi.org/10.1353/jda.2020.0008
  6. Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58(2), 277–297. https://doi.org/10.2307/2297968
  7. Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
  8. Armeanu, D., Vintilă, G., Andrei, J. V., Gherghina, Ş. C., Drăgoi, M. C., & Teodor, C. (2018). Exploring the link between environmental pollution and economic growth in EU-28 countries: Is there an environmental Kuznets curve? PLOS ONE, 13(5), 1–28. https://doi.org/10.1371/journal.pone.0195708
  9. Baharumshah, A. Z., & Almasaied, S. W. (2009). Foreign direct investment and economic growth in Malaysia: Interactions with human capital and financial deepening. Emerging Markets Finance and Trade, 45(1), 90–102. https://doi.org/10.2753/REE1540-496X450106
  10. Carvalho, T. P., Soares, F. A. A. M. N., Vita, R., da P. Francisco, R., Basto, J. P., & Alcalá, S. G. S. (2019). A systematic literature review of machine learning methods applied to predictive maintenance. Computers & Industrial Engineering, 137, 106024. https://doi.org/10.1016/j.cie.2019.106024
  11. Chaudhury, S., Nanda, N., & Tyagi, B. (2020). Impact of FDI on economic growth in South Asia: Does nature of FDI Mmatters? Review of Market Integration, 12(1–2), 51–69. https://doi.org/10.1177/0974929220969679
  12. Chen, S., Zhang, H., & Wang, S. (2022). Trade openness, economic growth, and energy intensity in China. Technological Forecasting and Social Change, 179, 121608. https://doi.org/10.1016/j.techfore.2022.121608
  13. Dumitrescu, E.-I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014
  14. Fayissa, B., & Nsiah, C. (2010). The impact of remittances on economic growth and development in Africa. The American Economist, 55(2), 92–103. https://doi.org/10.1177/056943451005500210
  15. Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth? American Economic Review, 89(3), 379–399. https://doi.org/10.1257/aer.89.3.379
  16. Ghosh Roy, A., & den Berg, H. F. (2006). Foreign direct investment and economic growth: A time-series approach. Global Economy Journal, 6(1), 1850084. https://doi.org/10.2202/1524-5861.1130
  17. Jalles, J. T. (2012). Openness, regional trade agreements and growth: Evidence from Asia. Asian Economic Journal, 26(1), 63–85. https://doi.org/10.1111/j.1467-8381.2011.02073.x
  18. Kizilkaya, O., Ahmet, A., & Akar, G. (2016). Dynamic relationship among foreign direct investments, human capital, economic freedom and economic growth: Evidence from panel cointegration and panel causality analysis. Theoretical and Applied Economics, 23(3), 127–140.
  19. Kotrajaras, P. (2013). Foreign direct investment and economic growth: A comparative study among East Asian countries. Applied Economics Journal, 17(2), 12–26.
  20. Li, F., & Zhang, S. (2022). Does financial crisis change the relationship between bank development and economic growth? Evidence from US states. PLOS ONE, 17(4), 1–19. https://doi.org/10.1371/journal.pone.0267394
  21. Lyroudi, K., Papanastasiou, J., & Vamvakidis, A. (2004). Foreign direct investment and economic growth in transition economies. South-Eastern Europe Journal of Economics, 2(1), 97–110.
  22. Makki, S. S., & Somwaru, A. (2004). Impact of foreign direct investment and trade on economic growth: Evidence from developing countries. American Journal of Agricultural Economics, 86(3), 795–801. https://doi.org/10.1111/j.0002-9092.2004.00627.x
  23. Mazenda, A. (2014). The effect of foreign direct investment on economic growth: Evidence from South Africa. Mediterranean Journal of Social Sciences, 5(10), 95. https://doi.org/10.5901/mjss.2014.v5n10p95
  24. Nguyen, M.-L. T., & Bui, T. N. (2021). Trade openness and economic growth: A Study on Asean-6. Economies, 9(3), 1–15. https://doi.org/10.3390/economies9030113
  25. Odhiambo, N. M. (2022). Foreign direct investment and economic growth in Kenya: An empirical investigation. International Journal of Public Administration, 45(8), 620–631. https://doi.org/10.1080/01900692.2021.1872622
  26. Papke, L. E., & Wooldridge, J. M. (2005). A computational trick for delta-method standard errors. Economics Letters, 86(3), 413–417. https://doi.org/10.1016/j.econlet.2004.07.022
  27. Pesaran, M. H. (2004). General diagnostic tests for cross-section dependence in panels (CESifo Working Paper No. 1229).
  28. Petreski, M. (2009). Exchange-rate regime and economic growth: A review of the theoretical and empirical literature (Economics Discussion Papers No. 2009–31).
  29. Polat, A., Shahbaz, M., Rehman, I. U., & Satti, S. L. (2015). Revisiting linkages between financial development, trade openness and economic growth in South Africa: Fresh evidence from combined cointegration test. Quality & Quantity, 49(2), 785–803. https://doi.org/10.1007/s11135-014-0023-x
  30. Ridzuan, A. R., Ismail, N. A., & Hamat, A. F. C. (2018). Foreign direct investment and trade openness: Do they lead to sustainable development in Malaysia? Journal of Sustainability Science and Management, 4, 79–97.
  31. Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9(1), 86–136. https://doi.org/10.1177/1536867x0900900106
  32. Sachs, J. D., & Warner, A. M. (1995). Natural resource abundance and economic growth (NBER Working Paper Series No. 5398) (Vol. 3). Massachusetts. https://doi.org/10.3386/w5398
  33. Tadmon, C., & Njike Tchaptchet, E. R. (2022a). Financial crisis spread, economic growth and unemployment: A mathematical model. Studies in Nonlinear Dynamics & Econometrics, Ahead of P. https://doi.org/10.1515/snde-2021-0081
  34. Tadmon, C., & Njike Tchaptchet, E. R. (2022b). Impact of financial crisis on economic growth: A stochastic model. Stochastics and Quality Control, 37(1), 45–63. https://doi.org/10.1515/eqc-2021-0049
  35. Thangavelu, S. M., Wei Yong, Y., & Chongvilaivan, A. (2009). FDI, growth and the Asian financial crisis: The experience of selected Asian countries. The World Economy, 32(10), 1461–1477. https://doi.org/https://doi.org/10.1111/j.1467-9701.2009.01202.x
  36. Zhang, K. (2003). Foreign direct investment in China: 1978-2002. Asian Economic and Political Issues, 8(1), 1–18.
No Related Submission Found