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International Trade, FDI, Inflation and Growth Nexus: Bangladesh Perspective (1971-2016)

Year 2022, Volume: 7 Issue: 2, 334 - 351, 30.12.2022

Abstract

The purpose of this paper is to examine the main factors that have significant effect on the economic growth of Bangladesh. Many studies around the world attempted to find the factors influencing the economic growth of differnet countries but for Bangladesh there are few research. To observe the main factors of economic growth, multiple linear regression method has been used with some popular diagnostic tests in this study to access the robustness of the estimated model for a period of 46 years from 1971 to 2016. The results of this study reveals that imports, exports, and remittances have a significant role in Bangladesh's economic growth. The findings further suggest that growth, export, and remittances have a long-term positive association whereas foreign direct investment has a negative influence on growth. Although various research has taken on an issue, this is the first initiative to use the multiple linear regression method with various robustness tests. The findings thus can be used for policy formulation.

References

  • Acemoglu, D., & Zilibotti, F. (1997). Was Prometheus unbound by chance? Risk, diversification, and growth. Journal of political economy, 105(4), 709-751.
  • Adams, R. H., & Cuecuecha, A. (2010). Remittances, Household Expenditure and Investment in Guatemala. World Development, 38(11), 1626-1641. doi:https://doi.org/10.1016/j.worlddev.2010.03.003
  • Adhikary, B. K., & Mengistu, A. A. (2008). Factors Influencing Foreign Direct Investment (FDI) in South and Southeast Asian Economies. J. World Investment & Trade, 9, 427.
  • Aggarwal, R., & Peria, M. S. M. (2006). Do workers' remittances promote financial development? World Bank Publications 3957.
  • Agosin, M., & Mayer, R. (2000). Foreign direct investment: Does it crowd in domestic investment. In United Nations Conference on Trade and Development Geneva, Switzerland, Working Paper, 146.
  • Agosin, M. R., & Machado, R. (2005). Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment? Oxford Development Studies, 33(2), 149-162. doi:10.1080/13600810500137749
  • Al Mamun, K. A., & Nath, H. K. (2005). Export-led growth in Bangladesh: a time series analysis. Applied Economics Letters, 12(6), 361-364. doi:10.1080/13504850500068194
  • Amin, S. (1974). Accumulation on a world scale: Monthly Review Press.
  • Baharumshah, A. Z., & Rashid, S. (1999). Exports, imports and economic growth in Malaysia: Empirical evidence based on multivariate time series. Asian economic journal, 13(4), 389-406.
  • Barajas, A., Chami, R., Fullenkamp, C., Gapen, M., & Montiel, P. J. (2009). Do workers' remittances promote economic growth? SSRN 1442255.
  • Bradford, S. C. (1934). Sources of information on specific subjects. Engineering, 137, 85-86. https://ci.nii.ac.jp/naid/10016754267/en/
  • Catrinescu, N., Leon-Ledesma, M., Piracha, M., & Quillin, B. (2009). Remittances, Institutions, and Economic Growth. World Development, 37(1), 81-92. doi:https://doi.org/10.1016/j.worlddev.2008.02.004
  • Chami, M. R., Jahjah, M. S., & Fullenkamp, C. (2003). Are immigrant remittance flows a source of capital for development? International Monetary Fund.
  • Chami, R., Fullenkamp, C., & Jahjah, S. (2005). Are Immigrant Remittance Flows a Source of Capital for Development? IMF Staff Papers, 52(1), 55-81. doi:10.2307/30035948
  • Chimobi, O. P. (2010). Inflation and economic growth in Nigeria. Journal of sustainable Development, 3(2), 159.
  • Choi, C. (2006). Does foreign direct investment affect domestic income inequality? Applied Economics Letters, 13(12), 811-814. doi:10.1080/13504850500400637
  • Dutta, D., & Ahmed, N. (2004). An aggregate import demand function for India: a cointegration analysis. Applied Economics Letters, 11(10), 607-613. doi:10.1080/1350455042000271134
  • Faria, J. R., & Carneiro, F. G. (2001). Does High Inflation Affect Growth in the Long and Short Run? Journal of Applied Economics, 4(1), 89-105. doi:10.1080/15140326.2001.12040559
  • Fayissa, B., & Nsiah, C. (2010). The Impact of Remittances on Economic Growth and Development in Africa. The American Economist, 55(2), 92-103. doi:10.1177/056943451005500210
  • Grossman, G. M., & Helpman, E. (1991). Trade, knowledge spillovers, and growth. European Economic Review, 35(2), 517-526. doi:https://doi.org/10.1016/0014-2921(91)90153-A
  • Gujrati, D. N., Gujrati, D. N., & Gujrati, D. N. (1995). Basic Economics: McGraw Hill Incorporated.
  • Gulati, U. C. (1978). Effect of Capital Imports on Savings and Growth in Less Developed Countries. Economic Inquiry, 16(4), 563-569. doi:https://doi.org/10.1111/j.1465-7295.1978.tb00526.x
  • H.L. Ahuja, t. e. (2016). Macroeconomic Theory and Policy. India: S Chand Publication.
  • Hooper, P., Johnson, K., & Marquez, J. (1998). Trade elasticities for G-7 countries. SSRN 86069.
  • Humpage, O. F. (2000). Do imports hinder or help economic growth. Federal Reserve Bank of Cleveland.
  • Hussain, M. (2014). Export and GDP in Pakistan: evidence from causality and cointegration analysis. International Journal of Management Cases, 16(1), 37-46.
  • Iqbal, Z., & Sattar, A. (2010). The contribution of workers’ remittances to economic growth in Pakistan. Working Papers & Research Reports, RR No. 187.
  • Javid, M., Arif, U., & Qayyum, A. (2012). Impact of remittances on economic growth and poverty. Academic Research International, 2(1), 433.
  • Kotan, Z., & Saygili, M. (1999). Estimating an import function for Turkey. Central Bank of the Republic of Turkey.
  • Kumar, N., & Pradhan, J. P. (2005). Foreign direct investment, externalities and economic growth in developing countries: Some empirical explorations. In Multinationals and foreign investment in economic development (pp. 42-84): Springer.
  • Lee, J.-W. (1995). Capital goods imports and long-run growth. Journal of development economics, 48(1), 91-110.
  • Levine, R., & Renelt, D. (1992). A Sensitivity Analysis of Cross-Country Growth Regressions. The American Economic Review, 82(4), 942-963. Retrieved from http://www.jstor.org/stable/2117352
  • Li, Y., Chen, Z., & San, C. (2010). Research on the relationship between foreign trade and the GDP growth of East China—empirical analysis based on causality. Modern Economy, 1(02), 118.
  • Love, J., & Chandra, R. (2005). Testing export-led growth in Bangladesh in a multivarate VAR framework. Journal of Asian Economics, 15(6), 1155-1168. doi:https://doi.org/10.1016/j.asieco.2004.11.009
  • Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3-42. doi:https://doi.org/10.1016/0304-3932(88)90168-7
  • Markusen, J. R., & Venables, A. J. (1999). Foreign direct investment as a catalyst for industrial development. European Economic Review, 43(2), 335-356. doi:https://doi.org/10.1016/S0014-2921(98)00048-8
  • McLean, B., & Shrestha, S. (2002). Capital Flows and Growth: Some New Results| RDP 2002-03: International Financial Liberalisation and Economic Growth. Reserve Bank of Australia Research Discussion Papers.
  • Mundaca, B. G. (2009). Remittances, Financial Market Development, and Economic Growth: The Case of Latin America and the Caribbean. Review of Development Economics, 13(2), 288-303. doi:https://doi.org/10.1111/j.1467-9361.2008.00487.x
  • Musila, J. W., & Sigué, S. P. (2006). Accelerating foreign direct investment flow to Africa: from policy statements to successful strategies. Managerial Finance, 32(7), 577-593. doi:10.1108/03074350610671575
  • Nath, H. K. (2009). Trade, Foreign Direct Investment, and Growth: Evidence from Transition Economies. Comparative Economic Studies, 51(1), 20-50. doi:10.1057/ces.2008.20
  • Nsiah, C., & Fayissa, B. (2013). Remittances and economic growth in Africa, Asia, and Latin American-Caribbean countries: a panel unit root and panel cointegration analysis. Journal of Economics and Finance, 37(3), 424-441. doi:10.1007/s12197-011-9195-6
  • Osili, U. O. (2004). Migrants and housing investments: Theory and evidence from Nigeria. Economic development and cultural change, 52(4), 821-849.
  • Ramos, F. F. R. (2001). Exports, imports, and economic growth in Portugal: evidence from causality and cointegration analysis. Economic Modelling, 18(4), 613-623. doi:https://doi.org/10.1016/S0264-9993(00)00055-9
  • Ramsey, J. B. (1969). Tests for specification errors in classical linear least‐squares regression analysis. Journal of the Royal Statistical Society: Series B (Methodological), 31(2), 350-371.
  • Ratha, D. (2003). Workers’ remittances: an important and stable source of external development finance. Global development finance.
  • Razin, A., Sadka, E., & Yuen, C.-W. (1999). Excessive FDI flows under asymmetric information. National bureau of economic research.
  • Rodrik, D. (1992). The limits of trade policy reform in developing countries. Journal of economic perspectives, 6(1), 87-105.
  • Romer, P. M. (1986). Increasing returns and long-run growth. Journal of political economy, 94(5), 1002-1037.
  • Sala-i-Martin, X. X., & Barro, R. J. (1995). Technological diffusion, convergence, and growth. Center Discussion Paper. (No. 735).
  • Sharif, T., & Abdullah, J. A. S. (2013). Human Resource Development and Economic Growth in Bangladesh: An Econometric Analysis. European Journal of Business and Management, 5(7), 133-144.
  • Siddiqui, A. H., & Iqbal, J. (2005). Impact of trade openness on output growth for Pakistan: An empirical investigation. MPRA Paper No. 23757.
  • Sweidan, O. D. (2004). Does inflation harm economic growth in Jordan? An econometric analysis for the period 1970-2000. International Journal of Applied Econometrics and Quantitative Studies, 1(2), 41-66.
  • Van den Bergh, J. C. (2009). The GDP paradox. Journal of Economic Psychology, 30(2), 117-135.
  • WDI. (2016). World development indicator. World Bank.
  • Yang, D. (2008). International migration, remittances and household investment: Evidence from Philippine migrants’ exchange rate shocks. The Economic Journal, 118(528), 591-630.
  • Zhang, K. (2001). DOES FOREIGN DIRECT INVESTMENT PROMOTE ECONOMIC GROWTH? EVIDENCE FROM EAST ASIA AND LATIN AMERICA. Contemporary Economic Policy, 19(2), 175-185. doi:https://doi.org/10.1111/j.1465-7287.2001.tb00059.x
  • Zhang, X., & Zou, H.-f. (1995). Foreign technology imports and economic growth in developing countries (Vol. 1412): World Bank Publications.

Uluslararası Ticaret, DYY, Enflasyon ve Büyüme Bağlantı Noktası: Bangladeş Perspektifi (1971-2016)

Year 2022, Volume: 7 Issue: 2, 334 - 351, 30.12.2022

Abstract

Bu çalışmanın amacı, Bangladeş'in ekonomik büyümesi üzerinde önemli etkisi olan ana faktörleri incelemektir. Dünya çapında birçok çalışma, farklı ülkelerin ekonomik büyümesini etkileyen faktörleri bulmaya çalışmaktadır. Ancak Bangladeş için literatürde çok az araştırma mevcuttur. Ekonomik büyümenin ana faktörlerini gözlemlemek için, 1971'den 2016'ya kadar 46 yıllık bir süre için tahmin edilen modelin güvenilirlik testleri için bu çalışmada bazı popüler güvenilirlik testleri ile çoklu doğrusal regresyon yöntemi kullanılmıştır. Çalışma sonuçlarına göre ithalat, ihracat ve işçi dövizleri, Bangladeş'in ekonomik büyümesinde önemli bir role sahiptir. Bulgular ayrıca, büyüme, ihracat ve işçi dövizlerinin büyüme ile uzun vadeli pozitif bir ilişkiye sahip olduğunu, doğrudan yabancı yatırımın ise büyüme üzerinde negatif bir etkiye sahip olduğunu göstermektedir. Bir konu üzerine çeşitli araştırmalar yapılmış olsa da, bu çalışma, çeşitli sağlamlık testleri ile çoklu doğrusal regresyon yöntemini kullanan ilk çalışmadır. Bulgular politika formülasyonu için kullanılabilir.

References

  • Acemoglu, D., & Zilibotti, F. (1997). Was Prometheus unbound by chance? Risk, diversification, and growth. Journal of political economy, 105(4), 709-751.
  • Adams, R. H., & Cuecuecha, A. (2010). Remittances, Household Expenditure and Investment in Guatemala. World Development, 38(11), 1626-1641. doi:https://doi.org/10.1016/j.worlddev.2010.03.003
  • Adhikary, B. K., & Mengistu, A. A. (2008). Factors Influencing Foreign Direct Investment (FDI) in South and Southeast Asian Economies. J. World Investment & Trade, 9, 427.
  • Aggarwal, R., & Peria, M. S. M. (2006). Do workers' remittances promote financial development? World Bank Publications 3957.
  • Agosin, M., & Mayer, R. (2000). Foreign direct investment: Does it crowd in domestic investment. In United Nations Conference on Trade and Development Geneva, Switzerland, Working Paper, 146.
  • Agosin, M. R., & Machado, R. (2005). Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment? Oxford Development Studies, 33(2), 149-162. doi:10.1080/13600810500137749
  • Al Mamun, K. A., & Nath, H. K. (2005). Export-led growth in Bangladesh: a time series analysis. Applied Economics Letters, 12(6), 361-364. doi:10.1080/13504850500068194
  • Amin, S. (1974). Accumulation on a world scale: Monthly Review Press.
  • Baharumshah, A. Z., & Rashid, S. (1999). Exports, imports and economic growth in Malaysia: Empirical evidence based on multivariate time series. Asian economic journal, 13(4), 389-406.
  • Barajas, A., Chami, R., Fullenkamp, C., Gapen, M., & Montiel, P. J. (2009). Do workers' remittances promote economic growth? SSRN 1442255.
  • Bradford, S. C. (1934). Sources of information on specific subjects. Engineering, 137, 85-86. https://ci.nii.ac.jp/naid/10016754267/en/
  • Catrinescu, N., Leon-Ledesma, M., Piracha, M., & Quillin, B. (2009). Remittances, Institutions, and Economic Growth. World Development, 37(1), 81-92. doi:https://doi.org/10.1016/j.worlddev.2008.02.004
  • Chami, M. R., Jahjah, M. S., & Fullenkamp, C. (2003). Are immigrant remittance flows a source of capital for development? International Monetary Fund.
  • Chami, R., Fullenkamp, C., & Jahjah, S. (2005). Are Immigrant Remittance Flows a Source of Capital for Development? IMF Staff Papers, 52(1), 55-81. doi:10.2307/30035948
  • Chimobi, O. P. (2010). Inflation and economic growth in Nigeria. Journal of sustainable Development, 3(2), 159.
  • Choi, C. (2006). Does foreign direct investment affect domestic income inequality? Applied Economics Letters, 13(12), 811-814. doi:10.1080/13504850500400637
  • Dutta, D., & Ahmed, N. (2004). An aggregate import demand function for India: a cointegration analysis. Applied Economics Letters, 11(10), 607-613. doi:10.1080/1350455042000271134
  • Faria, J. R., & Carneiro, F. G. (2001). Does High Inflation Affect Growth in the Long and Short Run? Journal of Applied Economics, 4(1), 89-105. doi:10.1080/15140326.2001.12040559
  • Fayissa, B., & Nsiah, C. (2010). The Impact of Remittances on Economic Growth and Development in Africa. The American Economist, 55(2), 92-103. doi:10.1177/056943451005500210
  • Grossman, G. M., & Helpman, E. (1991). Trade, knowledge spillovers, and growth. European Economic Review, 35(2), 517-526. doi:https://doi.org/10.1016/0014-2921(91)90153-A
  • Gujrati, D. N., Gujrati, D. N., & Gujrati, D. N. (1995). Basic Economics: McGraw Hill Incorporated.
  • Gulati, U. C. (1978). Effect of Capital Imports on Savings and Growth in Less Developed Countries. Economic Inquiry, 16(4), 563-569. doi:https://doi.org/10.1111/j.1465-7295.1978.tb00526.x
  • H.L. Ahuja, t. e. (2016). Macroeconomic Theory and Policy. India: S Chand Publication.
  • Hooper, P., Johnson, K., & Marquez, J. (1998). Trade elasticities for G-7 countries. SSRN 86069.
  • Humpage, O. F. (2000). Do imports hinder or help economic growth. Federal Reserve Bank of Cleveland.
  • Hussain, M. (2014). Export and GDP in Pakistan: evidence from causality and cointegration analysis. International Journal of Management Cases, 16(1), 37-46.
  • Iqbal, Z., & Sattar, A. (2010). The contribution of workers’ remittances to economic growth in Pakistan. Working Papers & Research Reports, RR No. 187.
  • Javid, M., Arif, U., & Qayyum, A. (2012). Impact of remittances on economic growth and poverty. Academic Research International, 2(1), 433.
  • Kotan, Z., & Saygili, M. (1999). Estimating an import function for Turkey. Central Bank of the Republic of Turkey.
  • Kumar, N., & Pradhan, J. P. (2005). Foreign direct investment, externalities and economic growth in developing countries: Some empirical explorations. In Multinationals and foreign investment in economic development (pp. 42-84): Springer.
  • Lee, J.-W. (1995). Capital goods imports and long-run growth. Journal of development economics, 48(1), 91-110.
  • Levine, R., & Renelt, D. (1992). A Sensitivity Analysis of Cross-Country Growth Regressions. The American Economic Review, 82(4), 942-963. Retrieved from http://www.jstor.org/stable/2117352
  • Li, Y., Chen, Z., & San, C. (2010). Research on the relationship between foreign trade and the GDP growth of East China—empirical analysis based on causality. Modern Economy, 1(02), 118.
  • Love, J., & Chandra, R. (2005). Testing export-led growth in Bangladesh in a multivarate VAR framework. Journal of Asian Economics, 15(6), 1155-1168. doi:https://doi.org/10.1016/j.asieco.2004.11.009
  • Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3-42. doi:https://doi.org/10.1016/0304-3932(88)90168-7
  • Markusen, J. R., & Venables, A. J. (1999). Foreign direct investment as a catalyst for industrial development. European Economic Review, 43(2), 335-356. doi:https://doi.org/10.1016/S0014-2921(98)00048-8
  • McLean, B., & Shrestha, S. (2002). Capital Flows and Growth: Some New Results| RDP 2002-03: International Financial Liberalisation and Economic Growth. Reserve Bank of Australia Research Discussion Papers.
  • Mundaca, B. G. (2009). Remittances, Financial Market Development, and Economic Growth: The Case of Latin America and the Caribbean. Review of Development Economics, 13(2), 288-303. doi:https://doi.org/10.1111/j.1467-9361.2008.00487.x
  • Musila, J. W., & Sigué, S. P. (2006). Accelerating foreign direct investment flow to Africa: from policy statements to successful strategies. Managerial Finance, 32(7), 577-593. doi:10.1108/03074350610671575
  • Nath, H. K. (2009). Trade, Foreign Direct Investment, and Growth: Evidence from Transition Economies. Comparative Economic Studies, 51(1), 20-50. doi:10.1057/ces.2008.20
  • Nsiah, C., & Fayissa, B. (2013). Remittances and economic growth in Africa, Asia, and Latin American-Caribbean countries: a panel unit root and panel cointegration analysis. Journal of Economics and Finance, 37(3), 424-441. doi:10.1007/s12197-011-9195-6
  • Osili, U. O. (2004). Migrants and housing investments: Theory and evidence from Nigeria. Economic development and cultural change, 52(4), 821-849.
  • Ramos, F. F. R. (2001). Exports, imports, and economic growth in Portugal: evidence from causality and cointegration analysis. Economic Modelling, 18(4), 613-623. doi:https://doi.org/10.1016/S0264-9993(00)00055-9
  • Ramsey, J. B. (1969). Tests for specification errors in classical linear least‐squares regression analysis. Journal of the Royal Statistical Society: Series B (Methodological), 31(2), 350-371.
  • Ratha, D. (2003). Workers’ remittances: an important and stable source of external development finance. Global development finance.
  • Razin, A., Sadka, E., & Yuen, C.-W. (1999). Excessive FDI flows under asymmetric information. National bureau of economic research.
  • Rodrik, D. (1992). The limits of trade policy reform in developing countries. Journal of economic perspectives, 6(1), 87-105.
  • Romer, P. M. (1986). Increasing returns and long-run growth. Journal of political economy, 94(5), 1002-1037.
  • Sala-i-Martin, X. X., & Barro, R. J. (1995). Technological diffusion, convergence, and growth. Center Discussion Paper. (No. 735).
  • Sharif, T., & Abdullah, J. A. S. (2013). Human Resource Development and Economic Growth in Bangladesh: An Econometric Analysis. European Journal of Business and Management, 5(7), 133-144.
  • Siddiqui, A. H., & Iqbal, J. (2005). Impact of trade openness on output growth for Pakistan: An empirical investigation. MPRA Paper No. 23757.
  • Sweidan, O. D. (2004). Does inflation harm economic growth in Jordan? An econometric analysis for the period 1970-2000. International Journal of Applied Econometrics and Quantitative Studies, 1(2), 41-66.
  • Van den Bergh, J. C. (2009). The GDP paradox. Journal of Economic Psychology, 30(2), 117-135.
  • WDI. (2016). World development indicator. World Bank.
  • Yang, D. (2008). International migration, remittances and household investment: Evidence from Philippine migrants’ exchange rate shocks. The Economic Journal, 118(528), 591-630.
  • Zhang, K. (2001). DOES FOREIGN DIRECT INVESTMENT PROMOTE ECONOMIC GROWTH? EVIDENCE FROM EAST ASIA AND LATIN AMERICA. Contemporary Economic Policy, 19(2), 175-185. doi:https://doi.org/10.1111/j.1465-7287.2001.tb00059.x
  • Zhang, X., & Zou, H.-f. (1995). Foreign technology imports and economic growth in developing countries (Vol. 1412): World Bank Publications.
There are 57 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Research Article
Authors

Sabrina Akter Nishat 0000-0002-5772-139X

Zobayer Ahmed 0000-0002-3168-6055

Md Arafat Hossain 0000-0001-8272-1220

Publication Date December 30, 2022
Published in Issue Year 2022 Volume: 7 Issue: 2

Cite

APA Nishat, S. A., Ahmed, Z., & Hossain, M. A. (2022). International Trade, FDI, Inflation and Growth Nexus: Bangladesh Perspective (1971-2016). JOEEP: Journal of Emerging Economies and Policy, 7(2), 334-351.

JOEEP is published as two issues per year June and December and all publication policies and processes are conducted according to the international standards. JOEEP accepts and publishes the research articles in the fields of economics, political economy, fiscal economics, applied economics, business economics, labour economics and econometrics. JOEEP, without depending on any institution or organization, is a non-profit journal that has an International Editorial Board specialist on their fields. All “Publication Process” and “Writing Guidelines” are explained in the related title and it is expected from authors to Show a complete match to the rules. JOEEP is an open Access journal.