Linkages between foreign direct investment, inflation, exports and economic growth in South America

Tee, Hao Wei (2022) Linkages between foreign direct investment, inflation, exports and economic growth in South America. [Final Year Project Report] (Unpublished)

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Abstract

This study determines the relationship between foreign direct investment (FDI), inflation, exports and economic growth in South America by using the panel data period from 1981 to 2017. The study applies the panel unit root test, multicollinearity test, panel autoregressive distributed lag (ARDL) model and panel Granger causality test. The panel ARDL estimation results show that, in the long run, export has a significant and positive impact and inflation has a significant and negative impact, while in the short run, FDI has a significant and positive impact on gross domestic product (GDP) per capita in South America. A significant and negative impact from GDP per capita previous year is also found. The results of panel Granger causality tests suggest a unidirectional causality running from export to GDP per capita and 2 bidirectional causalities between GDP per capita and FDI and between FDI and export. Based on these findings, several policy recommendations have been put forward for policymakers in the region to refer to.

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