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The role of FDI inflows and export on economic growth in Sri Lanka: An ARDL approach

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  • Md Reza Sultanuzzaman
  • Hongzhong Fan
  • Mahamud Akash
  • Banban Wang
  • Uddin Sarker Md Shakij

Abstract

This paper examines the long-run and short-run relationship between Foreign Direct Investment (FDI) inflows, exports, and economic growth in Sri Lanka over 1980–2016. The study implies Autoregressive Distributed Lag (ARDL) bounds testing approach to reveal the relationship between the variables. The study indicates that FDI inflows have a positive and significant relationship with economic growth in the long-run and short run. If FDI inflows increase, GDP growth will increase. But for exports, it has a negative and significant relationship with economic growth in the long-run. If exports increase, the GDP growth will decrease. Sri Lankan exports strongly depend on primary goods. There is a risk of finite resources and price volatility. It’s not surprising for developing economy like Sri Lanka. Also, in the short run, exports have a positive and significant relationship with economic growth. If exports increase, GDP growth will increase significantly. The findings suggest that both FDI inflows and exports influence economic progress in Sri Lanka. Based on emerging market economies, FDI inflows are useful in improving the production process in the host country, and hereafter it will contribute to quality exports and the economic growth of Sri Lanka. Policymakers should emphasize to gear up all the barriers for the economic development of Sri Lanka.

Suggested Citation

  • Md Reza Sultanuzzaman & Hongzhong Fan & Mahamud Akash & Banban Wang & Uddin Sarker Md Shakij, 2018. "The role of FDI inflows and export on economic growth in Sri Lanka: An ARDL approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1518116-151, January.
    • Handle: RePEc:taf:oaefxx:v:6:y:2018:i:1:p:1518116
    DOI: 10.1080/23322039.2018.1518116
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    Cited by:

    1. Mohamad Alnafissa & Mohammed Abdeen & Kamaleldin Bashir & Yosef Alamri & Fuad Alagsam & Abdulaziz Al-Duwais, 2022. "Impact of Gulf Cooperation Countries’ Foreign Direct Investment on Sudan’s Agricultural Exports," Sustainability, MDPI, vol. 14(6), pages 1-8, March.
    2. Md. Saiful Islam, 2023. "Does an export‐led growth proposition exist for Bangladesh's ready‐made garments sector? A nonlinear ARDL approach," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(5), pages 939-955, June.
    3. Mohammad Anamul Haque & Syed Mehmood Raza Shah & Muhammad Usman Arshad, 2022. "Sustainable Economic Growth and FDI Inflow: A Comparative Panel Econometric Analysis of Low-Income and Middle-Income Nations," Sustainability, MDPI, vol. 14(21), pages 1-14, November.
    4. Yassin Elshain Yahia & Haiyun Liu & Abdalla Sirag & Sayyed Sadaqat Hussain Shah, 2020. "The Impacts of Intra-Trade on Industrialization: Evidence from COMESA," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(2), pages 75-101, June.
    5. N.M. Odhiambo, 2021. "Foreign Direct Investment and Economic Growth in Kenya: An Empirical Investigation," Working Papers AESRI-2021-04, African Economic and Social Research Institute (AESRI), revised Jan 2021.
    6. Siddik, Abu Bakkar & Khan, Samiha & Khan, Uzma & Yong, Li & Murshed, Muntasir, 2023. "The role of renewable energy finance in achieving low-carbon growth: contextual evidence from leading renewable energy-investing countries," Energy, Elsevier, vol. 270(C).
    7. Subrata Deb Nath & Md. Rezaul Karim & Faruk Hossain & Mohammed Main Uddin, 2023. "Impact of External Public Debt on Economic Growth: A Case Study of Bangladesh," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 14(3), pages 01-08, September.
    8. Nicholas M. Odhiambo, 2022. "Foreign Direct Investment and Economic Growth in Kenya: An Empirical Investigation," International Journal of Public Administration, Taylor & Francis Journals, vol. 45(8), pages 620-631, June.
    9. Biswajit Maitra, 2021. "Relative role of external debt, FDI, and domestic investment in economic growth: evidence from Sri Lanka," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 329-347, September.
    10. Azka Amin & Sofia Anwar & Xi‐Hua Liu, 2022. "Outward foreign direct investment and economic growth in Romania: Evidence from non‐linear ARDL approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 665-677, January.
    11. T. Bhavan, 2023. "The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 24(1), pages 7-19, March.
    12. Sanjeev Kumar & Falguni Pattanaik & Ajay K. Singh, 2021. "Modeling Trade–Employment Elasticity Nexus: Evidence from India," Emerging Economy Studies, International Management Institute, vol. 7(1), pages 62-75, May.

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