The Nexus between Domestic Investment and Economic Growth in Developed Countries: Do Exports matter?

Bakari, Sayef (2022): The Nexus between Domestic Investment and Economic Growth in Developed Countries: Do Exports matter?

Abstract

We examine the effect of the exports on the relationship between domestic investment and economic growth. Data for 28 Developed Countries over the period 1998–2021 are used for panel data analysis. The effect of domestic investment on economic growth proves to be affected positively by exports and the effect of exports on the economic growth is positively strengthened by an increase in domestic investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Domestic Investment, Exports, Economic Growth, Developed Countries.
• Subjects: F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; 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

References

Abdallah, S., & Albadri, F. A. (Eds.). (2010). ICT Acceptance, Investment and Organization: Cultural Practices and Values in the Arab World. IGI Global.

Abel, A. B. (1990). Consumption and investment. Handbook of Monetary economics, 2, 725-778.

Able, S. L. (1980). Inflation uncertainty, investment spending, and fiscal policy. Economic Review, 65(Feb), 3-13.

Acaravci, A., & Ozturk, I. (2012). Foreign direct investment, export and economic growth: Empirical evidence from new EU countries. Romanian Journal of Economic Forecasting, 2(2), 52-67.

Anderson, D. (1990). Investment and economic growth. World Development, 18(8), 1057-1079.

Andoh-Baidoo, F. K., Osatuyi, B., & Kunene, K. N. (2014). ICT capacity as the investment and use of ICT: Exploring its antecedents in Africa. Information Technology for Development, 20(1), 44-59.

Anwer, M. S., & Sampath, R. K. (1999). Investment and economic growth (No. 1840-2016-152256).

Asiedu, E., & Freeman, J. (2009). The effect of corruption on investment growth: Evidence from firms in Latin America, Sub‐Saharan Africa, and transition countries. Review of Development Economics, 13(2), 200-214.

Atella, V., Atzeni, G. E., & Belvisi, P. L. (2003). Investment and exchange rate uncertainty. Journal of Policy Modeling, 25(8), 811-824.

Atesoglu, H. S. (2005). Inflation and investment in the United States. Investigación económica, 64(252), 15-20.

Bakari, S. (2016a). Does Domestic Investment Produce Economic Growth in Canada: Empirical Analysis Based on Correlation, Cointegration and Causality (No. 75966). University Library of Munich, Germany.

Bakari, S. (2016b). Impact of Exports and Imports on Economic Growth in Canada: Empirical Analysis Based on Causality (No. 75910). University Library of Munich, Germany.

Bakari, S. (2016c). Openness Can Be Good for Growth New Evidence on Panama: 1980-2015 (No. 75051). University Library of Munich, Germany.

Bakari, S. (2017f). Appraisal of Trade Potency on Economic Growth in Sudan: New Empirical and Policy Analysis. Asian Development Policy Review, 5(4), 213-225.

Bakari, S. (2017a). The impact of olive oil exports on economic growth: Empirical analysis from Tunisia. BİLTÜRK Journal of Economics and Related Studies, 2(3), 441-458.

Bakari, S. (2017b). The Impact of Vegetables Exports on Economic Growth in Tunisia. Economic Research Guardian, 7(2), 72-87.

Bakari, S. (2017g). The Long Run and Short Run Impacts of Exports on Economic Growth: Evidence from Gabon. Economic Research Guardian, 7(1), 40-57.

Bakari, S. (2017c). The Nexus between Export, Import, Domestic Investment and Economic Growth in Japan (No. 76110). University Library of Munich, Germany.

Bakari, S. (2017h). The relationship between export, import, domestic investment and economic growth in Egypt: Empirical analysis. EuroEconomica, 36(2).

Bakari, S. (2017i). The Three-Way Linkages between Export, Import and Economic Growth: New Evidence from Tunisia. Journal of Smart Economic Growth, 2(3), 13-53.

Bakari, S. (2017d). Trade and Economic Growth in Germany (No. 77404). University Library of Munich, Germany.

Bakari, S. (2017e). Why is South Africa Still a Developing Country? (No. 80763). University Library of Munich, Germany.

Bakari, S. (2018). The impact of citrus exports on economic growth: Empirical analysis from Tunisia. International Journal of Food and Agricultural Economics (IJFAEC), 6(1128-2019-539), 95-112.

Bakari, S. (2019a). ‘If France Continues This Strategy, Taxes Will Destroy Domestic Investment And Economic Growth,’ Journal of Smart Economic Growth, vol. 4(1), pages 31- 45, Mars.

Bakari, S. (2019b). Innovation and Economic Growth: Does Internet Matter?. BİLTÜRK Journal of Economics and Related Studies, 3(2), 109-116.

Bakari, S. (2019c). The relationship between economic growth, exports and imports in Morocco: An empirical validation based on VAR modeling techniques and causality in the meaning of Granger. Journal of Smart Economic Growth, 4(3), 47-55.

Bakari, S. (2020). Domestic Investment and Economic Growth in Tunisia: Causality, Trends and Challenges. Scholars' Press.

Bakari, S. (2021b). Are Domestic Investments in Spain a Source of Economic Growth? (No. 105526). University Library of Munich, Germany.

Bakari, S. (2021c). Reinvest the relationship between exports and economic growth in African countries: New insights from innovative econometric methods (No. 108785). University Library of Munich, Germany.

Bakari, S. (2021a). The Nexus Between Domestic Investment and Economic Growth in G7 Countries. Does Internet Matter?. Journal of Applied Economic Sciences (JAES), 16(72), 238-243.

Bakari, S., & Benzid, L. (2021). Modeling the Impact of Corruption, Degree of Freedom to Invest and Democracy on Domestic Investment: Evidence from MENA Countries. Studies and Scientific Researches. Economics Edition, (33).

Bakari, S., & El Weriemmi, M. (2022a). Causality between Domestic Investment and Economic Growth in Arab Countries (No. 113077). University Library of Munich, Germany.

Bakari, S., & El Weriemmi, M. (2022b). Exploring the Impact of Agricultural Investment on Economic Growth in France (No. 113970). University Library of Munich, Germany.

Bakari, S., & Krit, M. (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., & MABROUKI, M. (2016). The Relationship among Exports, Imports and Economic Growth in Turkey (No. 76044). University Library of Munich, Germany.

Bakari, S., & Mabrouki, M. (2017a). Impact of exports and imports on economic growth: new evidence from Panama. Journal of Smart Economic Growth, 2(1), 67-79.

Bakari, S., & Mabrouki, M. (2017b). The effect of agricultural exports on economic growth in South-Eastern Europe: An empirical investigation using panel data. Journal of Smart Economic Growth, 2(4), 49-64.

Bakari, S., & Mabrouki, M. (2018). The Impact of Agricultural Trade on Economic Growth in North Africa: Econometric Analysis by Static Gravity Model (No. 85116). University Library of Munich, Germany.

Bakari, S., & Saaidia, F. (2017). Assessment of Commerce Potency on Economic Growth in Italy: Empirical Analysis (No. 76480). University Library of Munich, Germany.

Bakari, S., & Tiba, S. (2019). The Impact of Trade Openness, Foreign Direct Investment and Domestic Investment on Economic Growth: New Evidence from Asian Developing Countries. Economic Research Guardian, 9(1), 46-54.

Bakari, S., & Tiba, S. (2020). Are Exchange Rate, Exports and Domestic Investment in Tunisia Cointegrated? A Comparison of ECM and ARDL Model. Economic Research Guardian, 10(1), 33-43.

Bakari, S., & Tiba, S. (2021). Tie Among Domestic Investment, Total Consumption And External Debt: Economic Policy Lessons From Tunisia. Journal of Smart Economic Growth, 6(3), 29-37.

Bakari, S., & Tiba, S. (2022). Determinants of Economic Growth: The Case of The United States of America. JDE (Journal of Developing Economies), 7(1), 29-44.

Bakari, S., Ahmadi, A., & Tiba, S. (2020a). The Nexus among Domestic Investment, Taxation, and Economic Growth in Germany: Cointegration and Vector Error Correction Model Analysis. Journal of Smart Economic Growth, 5(1), 37-47.

Bakari, S., El Weriemmi, M., & Mabrouki, M. (2022). The Impact of Digitalization and Trade Openness on Economic Growth: New Evidence from Richest Asian Countries (No. 113816). University Library of Munich, Germany.

Bakari, S., Fakraoui, N., & Mabrouki, M. (2020b). The Contribution of Domestic Investment, Exports and Imports on Economic Growth: A Case Study of Peru (No. 99041). University Library of Munich, Germany.

Bakari, S., Fakraoui, N., & Tiba, S. (2021). Domestic Investment, Export, Import And Economic Growth In Brazil: An Application Of Vector Error Correction Model. Journal of Smart Economic Growth, 6(1), 31-48.

Bakari, S., Mabrouki, M., & Elmakki, A. (2018c). The Impact of Domestic Investment in the Industrial Sector on Economic Growth with Partial Openness: Evidence from Tunisia''. Economics Bulletin, 38(1), 111-128.

Bakari, S., Mabrouki, M., & Elmakki, A. (2018b). The Nexus between Industrial Exports and Economic Growth in Tunisia: Empirical Analysis. Journal of Smart Economic Growth, 3(2), 31-53.

Bakari, S., Mabroukib, M., & Othmani, A. (2018a). The six linkages between foreign direct investment, domestic investment, exports, imports, labor force and economic growth: new empirical and policy analysis from Nigeria. Journal of Smart Economic Growth, 3(1), 25-43.

Bakari, S., Saaidia, F., & Soualhia, A. (2019b). Evaluation of Trade Influence on Economic Growth in China: A Time Series Analysis. Journal of Smart Economic Growth, 4(3), 57-72.

Bakari, S., Tiba, S., & Fakraoui, N. (2019a). Does Domestic Investment Contribute to Economic Growth in Uruguay? What did the Empirical Facts Say?. Journal of smart economic growth, 4(2), 53-69.

Baldwin, C. Y., & Ruback, R. S. (1986). Inflation, uncertainty, and investment. The Journal of Finance, 41(3), 657-668.

Barro, R. J. (1996). Determinants of Economic Growth: A Cross-Country Empirical Study (No. 5698). National Bureau of Economic Research, Inc.

Barro, R. J. (2003). Determinants of economic growth in a panel of countries. Annals of economics and finance, 4, 231-274.

Bouchoucha, N., & Bakari, S. (2021). The Impacts of Domestic and Foreign Direct Investments on Economic Growth: Fresh Evidence from Tunisia. Journal of Smart Economic Growth, 6(1), 83-102.

Braun, M., & Di Tella, R. (2004). Inflation, inflation variability, and corruption. Economics & Politics, 16(1), 77-100. Campos, J. E., Lien, D., & Pradhan, S. (1999). The impact of corruption on investment: Predictability matters. World development, 27(6), 1059-1067.

Chirinko, R. S. (1986). Business investment and tax policy: A perspective on existing models and empirical results. National Tax Journal, 39(2), 137-155.

Chirwa, T. G., & Odhiambo, N. M. (2016). Macroeconomic determinants of economic growth: A review of international literature. The South East European Journal of Economics and Business, 11(2).

Ciccone, A., & Jarociński, M. (2010). Determinants of economic growth: will data tell?. American Economic Journal: Macroeconomics, 2(4), 222-46.

Cuaresma, J. C., Doppelhofer, G., & Feldkircher, M. (2014). The determinants of economic growth in European regions. Regional Studies, 48(1), 44-67.

Cullison, W. (1993). Public investment and economic growth. FRB Richmond Economic Quarterly, 79(4), 19-33.

Darby, J., Hallett, A. H., Ireland, J., & Piscitelli, L. (1999). The impact of exchange rate uncertainty on the level of investment. The Economic Journal, 109(454), 55-67.

De Long, J. B., & Summers, L. H. (1991). Equipment investment and economic growth. The Quarterly Journal of Economics, 106(2), 445-502.

Desai, M. A., & Goolsbee, A. (2004). Investment, overhang, and tax policy. Brookings Papers on Economic Activity, 2004(2), 285-355.

Ditimi, A., & Matthew, O. (2014). FDI, private investment and public investment in Nigeria: An unravelled dynamic relation. Journal of Business and Economic Policy, 1(2), 29-38.

Ekeland, I., & Pirvu, T. A. (2008). Investment and consumption without commitment. Mathematics and Financial Economics, 2(1), 57-86.

Everhart, S. S., Vazquez, J. M., & McNab, R. M. (2009). Corruption, governance, investment and growth in emerging markets. Applied Economics, 41(13), 1579-1594.

Faini, R., & Melo, J. D. (1990). Adjustment, investment and the real exchange rate in developing countries. Economic Policy, 5(11), 491-519.

Fakraoui, N., & Bakari, S. (2019). Tie Among Domestic Investment, Exports And Economic Growth: Empirical Analysis From India. Journal of Smart Economic Growth, 4(1), 1-15.

Fama, E. F., & Gibbons, M. R. (1982). Inflation, real returns and capital investment. Journal of Monetary Economics, 9(3), 297-323.

Feldstein, M. S. (1980). Inflation, tax rules, and investment: Some econometric evidence.

Ghosh, D. (1996). The export growth-economic growth nexus: a causality analysis. The Journal of Developing Areas, 30(2), 167-182.

Gmelch, G. (1987). Work, innovation, and investment: the impact of return migrants in Barbados. Human Organization, 46(2), 131-140.

Guo, J., Zhou, Y., Ali, S., Shahzad, U., & Cui, L. (2021). Exploring the role of green innovation and investment in energy for environmental quality: An empirical appraisal from provincial data of China. Journal of Environmental Management, 292, 112779.

Hakansson, N. H. (1975). Optimal investment and consumption strategies under risk for a class of utility functions. In Stochastic Optimization Models in Finance (pp. 525-545). Academic Press.

Hall, R. E., & Jorgenson, D. W. (1967). Tax policy and investment behavior. The American Economic Review, 57(3), 391-414.

Haque, M. E., & Kneller, R. (2008). Public investment and growth: The role of corruption. Manchester: Centre for Growth and Business Cycle Research, Economic Studies, University of Manchester.

Harchaoui, T., Tarkhani, F., & Yuen, T. (2005). The effects of the exchange rate on investment: Evidence from Canadian manufacturing industries (No. 2005-22). Bank of Canada.

Haskel, J., & Wallis, G. (2013). Public support for innovation, intangible investment and productivity growth in the UK market sector. Economics letters, 119(2), 195-198.

Hassett, K. A., & Hubbard, R. G. (1997). Tax policy and investment. Fiscal Policy: Lessons from Economic Research, 339-385.

Herrendorf, B., Rogerson, R., & Valentinyi, A. (2021). Structural Change in Investment and Consumption—A Unified Analysis. The Review of Economic Studies, 88(3), 1311-1346.

Hong, C. Y., Huang, C. H., & Li, J. F. (2017). Investment, Energy Consumption and CO. International Journal of Energy Economics and Policy, 7(4), 138-143.

Hong, J. P. (2017). Causal relationship between ICT R&D investment and economic growth in Korea. Technological Forecasting and Social Change, 116, 70-75.

Huang, Y. (1999). Inflation and investment controls in China: The political economy of central-local relations during the reform era. Cambridge University Press.

Huang, Y. (2011). Private investment and financial development in a globalized world. Empirical Economics, 41(1), 43-56.

Iqbal, N., & Nawaz, S. (2009). Investment, inflation and economic growth nexus. The Pakistan Development Review, 863-874.

Janeček, K., & Shreve, S. E. (2004). Asymptotic analysis for optimal investment and consumption with transaction costs. Finance and Stochastics, 8(2), 181-206.

Jordaan, A. C., & Eita, J. H. (2007). Export and economic growth in Namibia: a Granger causality analysis. South African Journal of Economics, 75(3), 540-547.

Jorde, T. M., Sidak, J. G., & Teece, D. J. (2000). Innovation, investment, and unbundling. Yale J. on Reg., 17, 1.

Kaliva, K., & Koskinen, L. (2008). Stock market bubbles, inflation and investment risk. International review of financial analysis, 17(3), 592-603.

Kallsen, J., & Muhle‐Karbe, J. (2017). The general structure of optimal investment and consumption with small transaction costs. Mathematical Finance, 27(3), 659-703.

Khan, M. S., & Reinhart, C. M. (1990). Private investment and economic growth in developing countries. World development, 18(1), 19-27.

Kiyota, K., & Urata, S. (2004). Exchange rate, exchange rate volatility and foreign direct investment. World Economy, 27(10), 1501-1536.

Lachler, U., & Aschauer, D. A. (1998). Public investment and economic growth in Mexico (No. 1964). The World Bank.

Lang, T. M., Lin, S. H., & Vy, T. N. T. (2012). Mediate effect of technology innovation capabilities investment capability and firm performance in Vietnam. Procedia-Social and Behavioral Sciences, 40, 817-829.

Leinweber, D. J., & Arnott, R. D. (1995). Quantitative and computational innovation in investment management. Journal of Portfolio Management, 21(2), 8.

Love, I., & Zicchino, L. (2006). Financial development and dynamic investment behavior: Evidence from panel VAR. The Quarterly Review of Economics and Finance, 46(2), 190-210.

Madsen, J. B. (2003). Inflation and investment. Scottish Journal of Political Economy, 50(4), 375-397.

Mah, J. S. (2005). Export expansion, economic growth and causality in China. Applied Economics Letters, 12(2), 105-107.

Marrano, M. G., Haskel, J., & Wallis, G. (2009). What happened to the knowledge economy? ICT, intangible investment, and Britain's productivity record revisited. Review of income and wealth, 55(3), 686-716.

Maurer, B. (1999). Innovation and investment under financial constraints and product market competition. International Journal of Industrial Organization, 17(4), 455-476.

Milbourne, R., Otto, G., & Voss, G. (2003). Public investment and economic growth. Applied Economics, 35(5), 527-540.

Mintz, J., & Smart, M. (2004). Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada. Journal of public Economics, 88(6), 1149-1168.

Mkadmi, J. E., Bakari, S., & Msai, A. (2021a). Assessing the Impact of Tax Policies on Economic Growth in Tunisia: New Empirical and Policy Analysis (No. 109023). University Library of Munich, Germany.

Mkadmi, J. E., Bakari, S., & Othmani, A. (2021b). The Impact of Tax Revenues and Domestic Investments on Economic Growth in Tunisia (No. 108387). University Library of Munich, Germany.

Munnell, A. H. (1992). Policy watch: infrastructure investment and economic growth. Journal of economic perspectives, 6(4), 189-198.

Mutenyo, J., & Asmah, E. (2010). Does foreign direct investment crowd-out domestic private investment in Sub-Saharan Africa?. African Finance Journal, 12(1), 27-52.

Nazlioglu, S., Yalama, A., & Aslan, M. (2009). Financial development and investment: cointegration and causality analysis for the case of Turkey. International Journal of Economic Perspectives, 3(2), 107-119.

Nazmi, N., & Ramirez, M. D. (1997). Public and private investment and economic growth in Mexico. Contemporary Economic Policy, 15(1), 65-75.

Ndikumana, L. (2005). Financial development, financial structure, and domestic investment: International evidence. Journal of International Money and Finance, 24(4), 651-673.

Nucci, F., & Pozzolo, A. F. (2001). Investment and the exchange rate: An analysis with firm-level panel data. European Economic Review, 45(2), 259-283.

Okeahalam, C. C., & Bah, I. (1998). Perceived corruption and investment in Sub-Saharan Africa. South African Journal of Economics, 66(3), 364-386.

Onegina, V., Megits, N., Antoshchenkova, V., & Boblovskyi, O. (2020). Outcome of capital investment on labor productivity in agriculture sector of Ukraine. Journal of Eastern European and Central Asian Research (JEECAR), 7(1), 12-25.

O'Toole, C. M., & Tarp, F. (2014). Corruption and the efficiency of capital investment in developing countries. Journal of International Development, 26(5), 567-597.

Petrakos, G., & Arvanitidis, P. (2008). Determinants of economic growth. Economic alternatives, 1(1), 12-30.

Podrecca, E., & Carmeci, G. (2001). Fixed investment and economic growth: new results on causality. Applied Economics, 33(2), 177-182.

Ramirez, M. D. (1998). Does public investment enhance labor productivity growth in Chile? A cointegration analysis. The North American Journal of Economics and Finance, 9(1), 45-65.

Ramirez, M. D., & Nazmi, N. (2003). Public investment and economic growth in Latin America: An empirical test. Review of Development Economics, 7(1), 115-126.

Rodríguez-Moreno, J. A., & Rochina-Barrachina, M. E. (2019). ICT use, investments in R&D and workers’ training, firms’ productivity and markups: the case of Ecuadorian manufacturing. The European Journal of Development Research, 31(4), 1063-1106.

Saglam, B. B., & Yalta, A. Y. (2011). Dynamic linkages among foreign direct investment, public investment and private investment: Evidence from Turkey. Applied Econometrics and International Development, 11(2), 71-82.

Sassen, S. (1990). The mobility of labor and capital: A study in international investment and labor flow. Cambridge University Press.

Serven, L. (2002). Real exchange rate uncertainty and private investment in developing countries (Vol. 2823). World Bank Publications.

Shreve, S. E., & Soner, H. M. (1994). Optimal investment and consumption with transaction costs. The Annals of Applied Probability, 609-692.

Sibirskaya, E. V., Stroeva, O. A., Khokhlova, O. A., & Oveshnikova, L. V. (2014). An analysis of investment-innovation activity in Russia. Life Sci J, 11(7s), 155-158.

Snow, A., & Warren Jr, R. S. (1990). Human capital investment and labor supply under uncertainty. International Economic Review, 195-206.

Sualihu, M. A., Rankin, M., & Haman, J. (2021). The role of equity compensation in reducing inefficient investment in labor. Journal of Corporate Finance, 66, 101788.

Swaleheen, M. U. (2007). Corruption and investment choices: A panel data study. Kyklos, 60(4), 601-616.

Tang, T. C. (2006). New evidence on export expansion, economic growth and causality in China. Applied Economics Letters, 13(12), 801-803.

Tanzi, V., & Davoodi, H. (1998). Corruption, public investment, and growth. In The welfare state, public investment, and growth (pp. 41-60). Springer, Tokyo.

Tori, D., & Onaran, Ö. (2017). The effects of financialisation and financial development on investment: evidence from firm-level data in Europe (No. 16089). University of Greenwich, Greenwich Political Economy Research Centre.

Udomkerdmongkol, M., & Morrissey, O. (2008). Political regime, private investment, and foreign direct investment in developing countries (No. 2008/109). WIDER Research Paper.

Utonga, D., & Dimoso, R. L. (2019). The Nexus between Export and Economic Growth in Tanzania. Journal of Business School, 2, 49-59.

Vohra, R. (2001). Export and economic growth: Further time series evidence from less-developed countries. International Advances in Economic Research, 7(3), 345-350.

Wang, M. (2010). Foreign direct investment and domestic investment in the host country: evidence from panel study. Applied Economics, 42(29), 3711-3721.

Xu, Z. (2000). Financial development, investment, and economic growth. Economic inquiry, 38(2), 331-344.

Yoshino, N., & Abidhadjaev, U. (2016). Impact of infrastructure investment on tax: Estimating spillover effects of the Kyushu high-speed rail line in Japan on regional tax revenue.

Zakharov, N. (2019). Does corruption hinder investment? Evidence from Russian regions. European Journal of Political Economy, 56, 39-61.

Zariphopoulou, T. (1999). Optimal investment and consumption models with non-linear stock dynamics. Mathematical Methods of Operations Research, 50(2), 271-296.

Zouhaier, H., & Karim, K. M. (2012). Institutions, investment and economic growth. International Journal of Economics and Finance, 4(2), 152-162.