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Symmetric and Asymmetric Nexus Between FDI, Trade and Economic Growth: Evidence from ASEAN Countries

Author

Listed:
  • Kailash Pradhan

    (Department of Economics, Mahatma Gandhi Central University, Motihari, Bihar, India)

  • Sonali M. Mohapatra

    (Department of Economics, Rama Devi Women’s University, Bhubaneswar, Odisha, India)

  • Md. Umar Farooque

    (Jamia Milia Islamia Central University, New Delhi, India)

  • Lipsa Mohanty

    (Mahatma Gandhi Central University, Motihari, Bihar, India)

Abstract

This research aims to investigate the cause-and-effect relationship between foreign direct investment (FDI), trade, and economic growth in the countries of the Association of Southeast Asian Nations (ASEAN). Its originality lies in examining the causal connection between FDI inflows and economic growth by considering both symmetric and asymmetric behaviors. This nuanced approach, absent in prior research, uses symmetric and asymmetric panel vector error correction mechanisms to assess short-run and long-run connections from 1990 to 2020 for 10 ASEAN countries. Empirical results confirm a long-run causal connection between FDI, exports, imports, and GDP. The symmetric vector error correction model (VECM) findings indicate a two-way causal relationship between FDI and GDP. Furthermore, these results suggest that FDI boosts exports and that increased exports contribute to economic growth in ASEAN countries. When considering short-run effects, the estimations from the asymmetric model indicate that positive FDI shocks positively impact GDP, exports, and imports. These findings could guide ASEAN regions in formulating policies that promote FDI to stimulate exports and foster economic growth.

Suggested Citation

  • Kailash Pradhan & Sonali M. Mohapatra & Md. Umar Farooque & Lipsa Mohanty, 2024. "Symmetric and Asymmetric Nexus Between FDI, Trade and Economic Growth: Evidence from ASEAN Countries," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-30, December.
    • Handle: RePEc:wsi:afexxx:v:19:y:2024:i:04:n:s2010495224500192
    DOI: 10.1142/S2010495224500192
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    More about this item

    Keywords

    Foreign direct investment; import; exports; economic growth; ASEAN countries;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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