Chinese Foreign Direct Investment and Economic Growth of Bangladesh: A VECM Analysis

Sakib, Mohammad Nazmus and pande, Saikat and kumar, Rimon and Arif, Dr. Kazi mostafa (2021): Chinese Foreign Direct Investment and Economic Growth of Bangladesh: A VECM Analysis.

Abstract

The main objective of this study was to find out the impact of Chinese FDI on the economic growth of Bangladesh where yearly time series data is used over a period from 1997 to 2020. To obtain those objectives, this study implies the Johansen Co-integration test and vector error correction model as statistical techniques. This study explores that there is a positive and significant long-run relationship among Chinese FDI, Total FDI, Openness of trade, and economic growth of Bangladesh but those variables have no impact on Bangladesh economic growth in the short run. These results also identify there is a long-term granger causality occurring from Chinese FDI, TFDI, and trade openness to the GDP of Bangladesh. Our estimating error correction results is -.72 which conclude that in the long run, the economy is restored around .72 percent of the previous year's disequilibrium within the model and normalized co-integrating coefficient forecast a one percent increase in CFDI and one percent increase in TFDI elicit 0.04% and 0.17% increase in GDP respectively. So that, for enhancing GDP and economic development of Bangladesh our government should influence to bring out the Chinese FDI in our country and make effective policy that can create a strong long-run relationship between two countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Chinese FDI, Cointegration, error correction model, Bangladesh economic growth
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and Applications; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

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