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The drivers of economic growth in South Asia: evidence from a dynamic system GMM approach

Mohammad Mafizur Rahman (School of Commerce, University of Southern Queensland, Toowoomba, Australia)
Rezwanul Hasan Rana (School of Commerce, University of Southern Queensland, Toowoomba, Australia)
Suborna Barua (Federation University Australia, Churchill, Australia) (University of Dhaka, Dhaka, Bangladesh)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 2 August 2019

Abstract

Purpose

The purpose of this paper is to explore the drivers of economic growth in South Asia region for the period of 1975–2016 using the World Bank data.

Design/methodology/approach

Panel corrected standard error (static estimation) approach and one-step system generalised method of moments (dynamic estimation) approach are used.

Findings

Both the static and dynamic estimations indicate that energy use, gross capital formation and remittances are the main drivers of economic growth in South Asian countries. The effects of all these variables are positive and significant. The extent of the effect of energy use is much higher than that of other two variables on the economic growth. A 1 per cent increase in the growth of energy consumption can expedite the gross domestic product growth by approximately 3 per cent in South Asia. However, the key variables, such as trade, government expenditure and foreign direct investment demonstrate no significant effect.

Originality/value

The current research is original in the sense that it investigated the issue with a new data set using improved econometric techniques. Moreover, in South Asia as a whole, this kind of study is totally absent, particularly with panel data of a large number of years. Furthermore, this study has taken into account the problem of heterogeneity and the biases created by cross-section dependence, which were mostly absent in previous studies. Therefore, the findings of this research are new contributions to the existing literature.

Keywords

Acknowledgements

The authors declare no conflict of interest. The research did not receive funding of any kind.

Citation

Rahman, M.M., Rana, R.H. and Barua, S. (2019), "The drivers of economic growth in South Asia: evidence from a dynamic system GMM approach", Journal of Economic Studies, Vol. 46 No. 3, pp. 564-577. https://doi.org/10.1108/JES-01-2018-0013

Publisher

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Emerald Publishing Limited

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