The Six Linkages between Foreign Direct Investment, Domestic Investment, Exports, Imports, Labor Force and Economic Growth: New Empirical and Policy Analysis from Nigeria

Bakari, Sayef and Mabrouki, Mohamed and Othmani, Abdelhafidh (2018): The Six Linkages between Foreign Direct Investment, Domestic Investment, Exports, Imports, Labor Force and Economic Growth: New Empirical and Policy Analysis from Nigeria.

Abstract

The contribution of this study is to search the six linkages between Foreign Direct Investment, Domestic Investment, Exports, Imports, Labor Force and Economic Growth in Nigeria by using vector error correction model for the period 1981 – 2015. The empirical results indicate that there is no relationship between the six variables in the long run. In the short run imports cause economic growth and domestic investment; exports and FDI cause labor; and labor causes FDI. These findings present the critical situation of Nigeria, which requires an entry of urgent economic reforms.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Growth, Domestic investment, FDI, Labor, Exports, Imports, VECM, Nigeria.
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J21 - Labor Force and Employment, Size, and Structure; N - Economic History > N7 - Transport, Trade, Energy, Technology, and Other Services > N77 - Africa ; Oceania; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

References

Adams, S. (2009). Foreign direct investment, domestic investment and economic growth in Sub-Saharan Africa. Journal of Policy Modeling, 31, 939–949.

Ahmed. J and Kwam, ACC (1991). Causality between Exports and Economic Growth: Empirical Evidence from Africa. Economic Letters, vol, 37. 242-248.

Apergis, N and Payne, J.E (2009). Energy Consumption and Economic Growth in Central America: Evidence from a Panel Cointegration and Error Correction Model. Energy Economics 31 (2009) 211–216.

Asmah. E.E,. (1998). Export performance and Economic Growth: Empirical Evidence from Ghana 1966-1996. M. Phil. Thesis. University of Cape Coast.

Bhatt,P.R (2013). Causal Relationship between Exports, FDI and Income: The Case of Vietnam. Applied Econometrics and International Development Vol. 13-1 (2013).

Bakari, S (2017a). The Impact of Domestic Investment on Economic Growth: New evidence from Malaysia. Journal of Smart Economic Growth, , vol. 2(2), Pages 105-121.

Bakari, S,. (2017b). "The Long Run and Short Run Impacts of Exports on Economic Growth: Evidence from Gabon," Economic Research Guardian, Weissberg Publishing, vol. 7(1), pages 40-57, June.

Bakari, S,. (2017c). "Appraisal of Trade Potency on Economic Growth in Sudan: New Empirical and Policy Analysis," Asian Development Policy Review, Asian Economic and Social Society, vol. 5(4), pages 213-225, December.

Bakari, S (2017d). " The Three-Way Linkages Between Export, Import, and Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth. Volume 2, Number 3, Year 2017.

Bakari, S. and M. Krit, (2017). The Nexus between exports, imports and economic growth: Evidence from Mauritania. International Journal of Economics and Empirical Research, 5(1): 10-17.

Bakari, S and Mabrouki, M (2017). "Impact Of Exports And Imports On Economic Growth: New Evidence From Panama," Journal of Smart Economic Growth, , vol. 2(1), pages 67-79, March.

Balassa, B., 1995. Export, Policy Choices and Economic Growth in Developing Countries after the 1973 Oil Shock. Journal of Development Economics, vol. 18.pp. 23-35.

Balassa, B., 1989. Outward Orientation. In: Handbook of Development Economics, vol.2.

Balassa, B., 1978. Exports and Economic Growth: Further Evidence. Journal of Development Economics, vol.5, 181-189.

Barro, R. J. (1991) Economic Growth in a Cross Section of Countries. Quarterly Journal of Economics. 106, 407–444.

Bengoa, M., & Sanchez-Robels, B. (2003). Foreign direct investment, economic freedom and growth: New evidence from Latin America. European Journal of Political Economy, 19, 529–545.

Borensztein, J., De Gregorio, J., & Lee, J. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45, 115–135.

Carkovic, M., & Levine, R. (2002). Does foreign direct investment accelerate economic growth? University of Minnesota working paper.

Dasgupta, P. (2000). Population and Resources: An Exploration of Reproductive and Environmental Externalities. Population and Development Review, 26: 643–689.

Devarajan, S., V. Swaroop, and Heng-fu Zou (1996) The Composition of Public Expenditure and Economic Growth. Journal of Monetary Economics 37, 313–344.

Drèze, J. and Murthi, M. (2001). Fertility, Education, and Development: Evidence from India. Population and Development Review, 27: 33–63.

Edwards, S., (1998). “Openness. Productivity and Growth: What Do We Really Know?” Economic Journal, 108.

Fischer, S. (1993) The Role of Macroeconomic Factors in Growth. National Bureau of Economic Research. (Working Paper No. 4565).

Galor, O., Weil D. (2000). Population, technology and growth: from Malthus stagnation to the demographic transition and beyond, American Economic Review, 90, 806-828.

Helleiner, G. K., (1986). Outward Orientation, Import Instability and African Economic Growth: An Empirical Investigation, In: Theory and Reality in Development Essays in Honour of Paul Steeton Ed. S. Lall and F. Stewart, Macmillan, London

Huang, T-H., Xie Zixiong. (2013). Population and economic growth: a simultaneous equation perspective, Applied Economics, 45, 3820-3826.

Katherina, L., John, P., & Athanasios, V. (2004). Foreign direct investment and economic growth in transition economies. South Eastern Europe Journal of Economics, 2, 97–110.

Keyo, Y (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. Cogent Economics & Finance (2017), 5: 1332820 https://doi.org/10.1080/23322039.2017.1332820

Khan, M. S. (1996) Government Investment and Economic Growth in the Developing World. The Pakistan Development Review 35, 419–439.

Li, H, Zhang, J. (2007). Do high birth rates hamper economic growth? Review of Economics and Statistics, 30, 67-80.

Lucas Jr., R. E. (1988) On the Mechanics of Economic Development. Journal of Monetary Economics 22, 3–42.

Michaely, M., (1977). Export and Growth: An Empirical Investigation. Journal of Development Economics. 3 vol. 4, 49-53.

Omri A and Kahouli B (2014). The nexus between foreign investment, domestic capital and economic growth: empirical evidence from the MENA region. Research in Economics 68 (2014) 257–263.

Paudel, R. & Perera, N. (2009). Foreign Debt, Trade Openness, Labor Force and Economic Growth: Evidence from Sri Lanka. The ICFAI Journal of Applied Economics, 8 (1), 57-64.

Rahman, M. A., (1993). Export and Economic Development of Bangladesh. Dhaka: Young.

Ram, R,. (1987). Exports and Economic Growth in Developing Countries: Evidence from Time-series and Cross-section Data. Economic Development and Cultural Change, vol. 33, 415-425.

Rebelo, S. (1991) Long-Run Policy Analysis and Long-Run Growth. Journal of Political Economy 94:5, 56–62.

Romer, P. M. (1986) Increasing Returns and Long-Run Growth. Journal of Political Economy. 94:5 (October), 1002–1037.

Savvides, A., 1995. Economic Growth in Africa, World Development, 23 (3).

Sheehey, E.J (1992), ‘Exports and Growth: Additional Evidence’, Journal of Development Studies, Vol.28, No.4.

Sumei Tang, E. A. Selvanathan and S. Selvanathan (2008).Foreign Direct Investment, Domestic Investment and Economic Growth in China: A Time Series Analysis. The World Economy. Volume 31, Issue 10 October 2008. Pages 1292–1309.

Tan, B.W and Tang C.F (2016). Examining the Causal Linkages among Domestic Investment, FDI, Trade, Interest Rate and Economic Growth in ASEAN-5 Countries. International Journal of Economics and Financial Issues, 2016, 6(1), 214-220.

Tyler, W. (1981). Growth and Export Expansion in Less Developed Countries: Some Empirical Evidence. Journal of Development Economics, 9, 121-130.

Yao, W., Kinugasa, T., Hamori, S. (2013). An empirical analysis of the relationship between economic development and population growth in China, Applied Economics, 45, 4651-4661,

Zhang, K. H. (2001). Does foreign direct investment promote economic growth: Evidence from East Asia and Latin America. Contemporary Economic Policy, 19, 175–185.