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The short-run and long-run dynamics among FDI, trade openness and economic growth: using a bootstrap ARDL test for co-integration in selected South Asian countries

Hummera Saleem (Department of Economics, National University of Modern Languages (NUML) Islamabad, Islamabad, Pakistan)
Malik Shahzad Shabbir (Lahore Business School, University of Lahore - Defence Road Campus, Sialkot, Pakistan)
Muhammad Bilal khan (Department of Accounting, Wuhan University, Wuhan, China)

South Asian Journal of Business Studies

ISSN: 2398-628X

Article publication date: 7 May 2020

Issue publication date: 22 May 2020

543

Abstract

Purpose

The purpose of this study is to analyze the dynamic causal relationship between foreign direct investment (FDI), gross domestic product (GDP) and trade openness (TO) on a set of five selected South Asian countries.

Design/methodology/approach

This study used newly developed bootstrap auto regressive distributed lags (ARDL) cointegration test to examine the long-run relationship among FDI, GDP and TO for selected South Asian countries for 1975–2016.

Findings

The economic growth (EG) is significantly related to TO for Bangladesh, India and Sri Lanka and the expansion of TO is crucial for growth in these countries. The results show that all countries (except Bangladesh) found the existence of long-run cointegration between FDI, GDP and TO, whereas FDI is a dependent variable. These results concluded that FDI and TO are contributing to EG in these selected countries.

Originality/value

This study is one of the first attempts to investigate the causal relationship and address the short and long dynamic among FDI, GDP and TO regarding five south Asian countries such as Bangladesh, India, Nepal, Pakistan and Sri Lanka.

Keywords

Acknowledgements

The authors are grateful to the anonymous referees and the editorial team of the journal for their beneficial suggestions to improve the quality of the article.Funding: The authors have not received any financial support for the research, authorship and publication of this article.Declaration of conflicting interests: The authors declared no potential conflicts of interest concerning the research, authorship and publication of this article.

Citation

Saleem, H., Shabbir, M.S. and Bilal khan, M. (2020), "The short-run and long-run dynamics among FDI, trade openness and economic growth: using a bootstrap ARDL test for co-integration in selected South Asian countries", South Asian Journal of Business Studies, Vol. 9 No. 2, pp. 279-295. https://doi.org/10.1108/SAJBS-07-2019-0124

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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