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On the Causal Dynamics Between Economic Growth, Trade Openness and Gross Capital Formation: Evidence from BRICS Countries

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  • Ritu Rani
  • Naresh Kumar

Abstract

The present study investigates the long-run association and direction of causality among economic growth, trade openness and gross capital formation in Brazil, Russia, India, China and South Africa (BRICS) nations. This article applied autoregressive distributed lag (ARDL) and vector error correction model to examine the long-run association and casual relationship among the competing variable. The ARDL bound test results indicate long-run relationship among economic growth, trade openness and gross capital formation. Granger causality results reveal unidirectional causality from trade openness to economic growth in India and that Brazil supports trade-led growth hypothesis while bidirectional causality is found between trade openness and economic growth in China supporting feedback hypothesis. In addition, the empirical evidence of unidirectional causality moving from economic growth to trade openness is found in South Africa validating growth-led trade hypothesis. As trade openness is a significant determinant of economic growth in BRICS, the member countries should adopt policies towards trade liberalization to sustain economic growth. Moreover, these emerging markets offer a pool of investment opportunities for the global managers.

Suggested Citation

  • Ritu Rani & Naresh Kumar, 2019. "On the Causal Dynamics Between Economic Growth, Trade Openness and Gross Capital Formation: Evidence from BRICS Countries," Global Business Review, International Management Institute, vol. 20(3), pages 795-812, June.
    • Handle: RePEc:sae:globus:v:20:y:2019:i:3:p:795-812
    DOI: 10.1177/0972150919837079
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    Citations

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    Cited by:

    1. Udi Joshua & Hasan Güngör & Festus Victor Bekun, 2023. "Assessment of Foreign Direct Investment-Led Growth Argument in South Africa Amidst Urbanization and Industrialization: Evidence from Innovation Accounting Tests," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(3), pages 3374-3394, September.
    2. Maha Kalai & Hamdi Becha & Kamel Helali, 2024. "Threshold effect of foreign direct investment on economic growth in BRICS countries: new evidence from PTAR and PSTAR models," International Journal of Economic Policy Studies, Springer, vol. 18(1), pages 227-258, February.
    3. Woon Kan Yap & Fakarudin Kamarudin & Jenny Gryzelius, 2025. "External debt, state ownership and technical efficiency: A stochastic frontier analysis of emerging economies," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 24(1), pages 123-150, January.

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