FDI, Trade Openness, Capital Formation, and Economic Growth in Bangladesh: A Linkage Analysis

By Bishnu Kumar Adhikary. 2010

254 citations recorded by the source corpus.

This paper examines the linkage between FDI, trade openness, capital formation, and economic growth rates in Bangladesh over a period 1986 to 2008 using time series analysis. All variables are found stationary at first differencing both at constant and constant plus trend level under the ADF and PP stationary tests. The Johansen-Juselius procedure is applied to test the cointegrating relation between variables followed by a vector error correction model. The empirical results trace a strong long-run equilibrium relationship between GDP growth rates and the explanatory variables with unidirectional casual flows. The volume of FDI and level of capital formation are found to have significant positive effect on changes in real GDP. The degree of trade openness unleashes negative but diminishing influence on GDP growth rates. We conclude that Bangladesh should formulate FDI-led polices and ensure higher degree of capital formation to enhance her economic growth rates at large.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/6bb91d8cef1c85efd78dbfca7d9d8058fb813449

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Citations in the corpus

Nexus between foreign direct investment and economic growth in Bangladesh: an augmented autoregressive distributed lag bounds testing approach (2020, background): “on economic growth may be realized only by the FDI inflows in the economies that are expected to grow faster and follow open-trade policies (Adhikary 2010; Shimul et al. 2009).”
The asymmetric effect of trade openness on economic growth in South Africa: a nonlinear ARDL approach (2020, background): “(2016), Vlastou (2010), Zahonogo (2017), Adhikary (2010), Goh et al.”
Determinants of foreign direct investment in BRICS economies: Analysis of economic, institutional and political factor (2012, unknown): “(Adhikary 2011; Bhavan et.al 2011; Azam 2010).”
Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan (2012, methodology): “19 ARDL bounds testing is flexible regarding the integrating order of the variables whether variables are found to be stationary at I(1) or I(0) or I(1) / I(0)(17).”