Foreign direct investment, exports and economic growth in ASEAN region: Empirical analysis from panel data

Abstract

© Springer International Publishing AG 2017. The major purpose of this research study is twofold. Firstly, to examine the causal relationship among foreign direct investment (FDI), exports, and economic growth of ASEAN economy comprising Cambodia, Lao PDR, Malaysia, Philippines, Singapore, Thailand, and Vietnam, by using panel VECM covering from 2000 to 2014. Secondly, to estimate the impact of FDI and exports on ASEAN economy. The dummy variable representing the financial crisis in 2008 is used to see the real effect in this study. The empirical results indicate that bidirectional causal relation between economic growth and exports is found in ASEAN association while there are two unidirectional causal linkages between FDI-economic growth and FDI-exports as the causal direction running from FDI to economic growth and running from FDI to exports in ASEAN economy. Based on the findings from panel dynamic ordinary least square (DOLS) and fully modified ordinary least square (FMOLS) methods, the elasticity of GDP with respect to FDI is 0.048 and 0.044% and respect to exports is 0.547 and 0.578%. Therefore, it can be concluded that FDI and exports are significant aspects which positively impact on ASEAN economic development.