IDEAS home Printed from
   My bibliography  Save this paper

Foreign direct investment, exports, and economic growth in selected emerging countries: Multivariate VAR analysis


  • Kalirajan, Kaliappa
  • Miankhel, Adil
  • Thangavelu, Shandre


The paper adopts a time series framework of the Vector Error Correction Models (VECM) to study the dynamic relationship between export, FDI and GDP for six emerging countries of Chile, India, Mexico, Malaysia, Pakistan and Thailand. Stationarity of the series with structural breaks is also examined in the model. Given that these countries are at different stages of growth, we will be able to identify the impact of FDI and export on economic growth at different stages of growth. The results suggest that in South Asia, there is evidence of an export led growth hypothesis. However, in the long run, we identify GDP growth as the common factor that drives growth in other variables such as exports in the case of Pakistan and FDI in the case of India. The Latin American countries of Mexico and Chile show a different relationship in the short run but in the long run, exports affect the growth of FDI and output. In the case of East Asian countries, we find bi-directional long run relationship among exports, FDI and GDP in Malaysia, while we find a long run uni-directional relationship from GDP to export in case of Thailand.

Suggested Citation

  • Kalirajan, Kaliappa & Miankhel, Adil & Thangavelu, Shandre, 2009. "Foreign direct investment, exports, and economic growth in selected emerging countries: Multivariate VAR analysis," MPRA Paper 22763, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22763

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Easterly, William & King, Robert G & Levine, Ross & Rebelo, Sérgio, 1994. "Policy, Technology Adoption and Growth," CEPR Discussion Papers 957, C.E.P.R. Discussion Papers.
    2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    3. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    4. Liu, Xiaming & Wang, Chengang & Wei, Yingqi, 2001. "Causal links between foreign direct investment and trade in China," China Economic Review, Elsevier, vol. 12(2-3), pages 190-202.
    5. Shandre Mugan Thangavelu & Gulasekaran Rajaguru, 2004. "Is there an export or import-led productivity growth in rapidly developing Asian countries? a multivariate VAR analysis," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1083-1093.
    6. Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, vol. 59(2), pages 175-182, May.
    7. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    8. Shiva S. Makki & Agapi Somwaru, 2004. "Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 795-801.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Yu SHENG & Yanrui WU & Xunpeng SHI & Dandan ZHANG, 2014. "Markket Integration and Energy Trade Efficiency: An Application of Malmqvist Index to Analyse Multi-Product Trade," Working Papers DP-2014-20, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. Sheng, Yu & Wu, Yanrui & Shi, Xunpeng & Zhang, Dandan, 2015. "Energy trade efficiency and its determinants: A Malmquist index approach," Energy Economics, Elsevier, vol. 50(C), pages 306-314.
    3. Chakraborty, Debashis & Mukherjee, Jaydeep & Lee, Jaewook, 2016. "Do FDI Inflows influence Merchandise Exports? Causality Analysis on India over 1991-2016," MPRA Paper 74851, University Library of Munich, Germany.
    4. Khan, Shiraz & Mehboob, Farhan, 2014. "Impact of FDI on GDP: An Analysis of Global Economy on Production Function," MPRA Paper 55352, University Library of Munich, Germany.
    5. Mohammed Ershad Hussain & Mahfuzul Haque, 2016. "Foreign Direct Investment, Trade, and Economic Growth: An Empirical Analysis of Bangladesh," Economies, MDPI, Open Access Journal, vol. 4(2), pages 1-14, April.
    6. repec:era:chaptr:2013-rpr-29-06 is not listed on IDEAS
    7. Baher Mohamed Atlam & Ahmed Ashour Soltan & Noha Mohey Mohamed, 2017. "The Impact of National Private Investment on Manufacturing in Egypt," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 192-200.
    8. Syed Imran Ali Meerza, 2012. "Causal links between trade, foreign direct investment and economic growth for Bangladesh," SDSU Working Papers in Progress 12012, South Dakota State University, Department of Economics.

    More about this item


    FDI; Exports; Multivariate VAR; Pakistan; India; Malaysia; Thailand; Chile; Mexico.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:22763. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.