Casual nexus between economic growth, FDI and employment: An inquiry into BRICS and ASEAN

Abstract

This article discusses the documentary evidence on the Efficient Market Hypothesis (EMH) This study examines the nexus between economic growth, FDI and employment. We employ panel data for BRICS and ASEAN nations for the period 1993 to 2019. We have used FGLS considering the cross-section dependence and slope heterogeneity. Moreover, we apply the Pairwise Dumitrescu-Hurlin panel non-causality tests to confirm the direction of causality. The study finds that overall impact of FDI and employment on economic growth is ambiguous. However, in HIE, FDI positively impact economic growth. We observed bidirectional causality between FDI and economic growth. Human capital and globalization have positive impact on economic growth. The relation between FDI and employment is ambiguous. However, it may increase employment in high income economies. To receive the intended benefit of FDI, authorities should focus on the local development of the region. The positive sign of openness suggests restrictive trade policies should not be encouraged. However, the sophisticated policy is required to maintain the high economic growth and low unemployment.

Keywords

• asean
• brics
• feasible generalized least square
• foreign direct investment
• panel non causality