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An Application of Vector Error Correction Model Approach in Explaining the Impact of Foreign Direct Investment on Economic Growth of Asian Developing Countries

Author

Listed:
  • Najaf Ali

    (School of Economics, Shanghai University, Shanghai, China)

  • Ye Mingque

    (School of Economics, Shanghai University, Shanghai, China)

Abstract

This study has binal purposes, the first one is to inspect the interrelation between foreign direct investment and economic growth and the second one is to scrutinize the effect of foreign direct investment on economic growth of Sri Lanka, Pakistan, Philippine and Thailand using panel data for the period of 1990-2014.This study applies Johansen Cointegration test and vector error correction model (VECM) analysis as evaluation techniques. The facts show that there is a positive, significant and long period relationship among FDI and economic growth. The results also discloses there is a long-term Granger causality running from foreign direct investment, gross capital formation, government consumption, trade openness and labor to GDP.

Suggested Citation

  • Najaf Ali & Ye Mingque, 2018. "An Application of Vector Error Correction Model Approach in Explaining the Impact of Foreign Direct Investment on Economic Growth of Asian Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 133-139.
    • Handle: RePEc:eco:journ1:2018-04-17
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    References listed on IDEAS

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    2. Sakib, Mohammad Nazmus & pande, Saikat & kumar, Rimon & Arif, Dr. Kazi mostafa, 2021. "Chinese Foreign Direct Investment and Economic Growth of Bangladesh: A VECM Analysis," MPRA Paper 109654, University Library of Munich, Germany.

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    More about this item

    Keywords

    FDI; Asian developing countries; Vector Error Correction Model;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F19 - International Economics - - Trade - - - Other
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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