PANEL DATA ANALYSIS OF RELATIONSHIP BETWEEN ECONOMIC GROWTH, FOREIGN DIRECT INVESTMENT, EXCHANGE RATE AND TRADE OPENNESS IN NEWLY INDUSTRIALIZED COUNTRIES

Abstract

This study examines the effects of foreign direct investment, gross fixed capital formation, real exchange rate, and trade openness on economic growth in newly industrialized countries for 1982 and 2019 by using the panel ARDL method. Before estimating panel ARDL, we tested the existence of cross-sectional dependence among the countries, determining the degree of the integrations of variables by using second-generation panel unit root tests and examining the cointegration among the variables. Finally, we carry out the Dumitreuscu Hurlin causality test to determine the direction of the causal relationship between variables. The study results indicate a positive long-run relationship between economic growth and FDI, gross capital formation and real exchange rate, and a negative long-run relationship with trade openness. The study's findings have significant implications for the industrial policies that these countries should adopt to reach developed countries.