Title: Growth, foreign investment and trade-openness interactions in ten OECD countries: a panel-VAR approach

Authors: Rudra P. Pradhan; Tapan P. Bagchi; Khorshed Chowdhury; Neville R. Norman

Addresses: Vinod Gupta School of Management, Indian Institute of Technology Kharagpur, WB-721302, India; School of Management, Asian Institute of Technology, Bangkok, Pathumthani-12120, Thailand ' Narsee Monjee Institute of Management Studies, Mumbai, Shirpur Campus, Dhule 425405, India ' Faculty of Commerce, School of Economics, University of Wollongong, 2522, Australia ' Department of Economics, University of Melbourne, Victoria-3010, Australia; Department of Economics, University of Cambridge, Cambridge-CB3 9DD, UK

Abstract: This paper investigates statistical relationships between economic growth, foreign direct investment (FDI) and trade openness, using panel-VAR methods in relation to ten significant OECD countries: Austria, Canada, Finland, Iceland, Ireland, Japan, Norway, Spain, Switzerland and the USA, between 1970 and 2010. We find that foreign direct investment, trade openness and economic growth are co-integrated, suggesting the presence of long-run equilibrium relationships between them. Our Granger-causality tests indicate the presence of bidirectional causality linking foreign direct investment to trade openness, with unidirectional causality from foreign direct investment to economic growth, and also from trade openness to economic growth. Significantly, the pattern of causal relationships varies between the countries we studied.

Keywords: foreign direct investment; FDI; trade openness; economic growth; panel-VAR; OECD countries; Austria; Canada; Finland; Iceland; Ireland; Japan; Norway; Spain; Switzerland; USA; United States.

DOI: 10.1504/IJBAAF.2012.053338

International Journal of Banking, Accounting and Finance, 2012 Vol.4 No.4, pp.273 - 293

Accepted: 23 Jan 2013
Published online: 23 Aug 2014 *

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