2017, Volume 70 - Issue 4
RSS feed citation: At RePEc
Publication date: 20 October 2017
INCOME INEQUALITY AND GROWTH: NEW INSIGHTS FROM ITALYRead the article
FOREIGN DIRECT INVESTMENTS, EXPORTS, UNEMPLOYMENT AND ECONOMIC GROWTH IN THE NEW EU MEMBERS – A PANEL DATA APPROACHRead the article
IS REAL DEPRECIATION OR MORE GOVERNMENT DEBT CONTRACTIONARY? THE CASE OF ROMANIARead the article
REASSESSING THE SUSTAINABILITY OF PUBLIC FINANCES IN POLAND: EVIDENCE FROM A MULTICOINTEGRATION APPROACHRead the article
Nicholaos DRITSAKIS, Department of Applied Informatics, University of Macedonia, Economics and Social Sciences, Thessaloniki, Greece
Pavlos STAMATIOU, Department of Applied Informatics, University of Macedonia, Economics and Social Sciences, Thessaloniki, Greece
Foreign direct investments and exports play an important role in economic growth worldwide. Particularly, foreign direct investments have been considered as one of the best alternatives to fuel economic growth mainly for developing countries. Policy, macroeconomic stability of each country as well as the labor market of an economy are some of the main aspects analyzed by foreign investors before investing in a country. In this paper we study the interdependencies among foreign direct investment, exports, unemployment and economic growth for thirteen new member countries of European Union (EU) for the period 1995-2013. The econometric methodology, based on error correction model is used to analyze the short and long term causal relationship between the examined variables. The main finding of the study is that there is bidirectional long term causal relationship between exports and economic growth and unidirectional long term causal relationship between economic growth and unemployment. Also, the results of the paper show that there is a short run unidirectional causality between exports and foreign direct investments.
C22, C33, E31, E50, H60, O16
Economic Growth, Foreign Direct Investments, Exports, Unemployment, FMOLS, DOLS, Causality
Aktar, I. and L. Ozturk (2009), “Can Unemployment be Cured by Economic Growth and Foreign Direct Investment in TURKEY?”, International Research Journal of Finance and Economics, 1(27), 203-211.
Alexiou, C., P. Tsaliki and L. Tsoulfidis (2014), “Classical Theory of Investment. Panel Cointegration Evidence from Thirteen EU Countries”, MPRA Working Paper No. 60598. Agrawal, G. (2015), “Foreign Direct Investment and Economic Growth in BRICS Economies: A Panel Data Analysis”, Journal of Economics, Business and Management, 3(4), 421-424.
AMECO (2015),Annual Macro-Economic Database, European Commission. Arvanitidis, P., S. Pavleas and G. Petrakos (2007), “Determinants of Economic Growth: The Experts View”, University of Thessaly, Discussion Paper Series, 15(1), 1-22.
Blomstrom, M., R.E. Lipsey and M. Zejan (1992), “What Explains Developing Country Growth?”, NBER Working Paper No. 4132. Borensztein, E., J. De Gregorio and J-W. Lee (1998), “How Does Foreign Direct Investment Affect Economic Growth?”, Journal of International Economics, 45(1), 115-135.
Breitung, J. (2001), The Local Power of Some Unit Root Tests for Panel Data, in: B.H. Baltagi, T.B. Fomby, R. Carter Hill (Eds), Advances in Econometrics, Non-Stationary Panels, Panel Cointegration, and Dynamic Panels, Vol. 15, JAI Press: Amsterdam. Chang, S-C. (2005), “The Dynamic Interactions among Foreign Direct Investment, Economic Growth, Exports and Unemployment: Evidence from Taiwan”, Economic Change and Restructuring, 38(3), 235-256.
Dickey, D.A. and W.A. Fuller (1979), “Distributions of the Estimators for Autoregressive Time Series with a Unit Root”, Journal of American Statistical Association, 74(366), 427- 431.
Dickey, D.A. and W.A. Fuller (1981), “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”, Econometrica, 49(4), 1057-1072.
Dogan, E. (2013), “Foreign Direct Investment and Economic Growth: A Time Series Analysis of Turkey, 1979-2011”, Journal of the Faculty of Economics and Administrative Sciences, 3(2), 239-252.
Dritsaki, C. and M. Dritsaki (2012), “Exports and FDI: A Granger Causality Analysis in a Heterogeneous Panel”, Economics Bulletin, 32(4), 3128-3139.
Dritsaki, M., C. Dritsaki and A. Adamopoulos (2004), “A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth in Greece”, American Journal of Applied Sciences, 1(3), 230-235.
Dritsakis, N. and P. Stamatiou (2014), “Exports, Foreign Direct Investment and Economic Growth for Five European Countries: Granger Causality Tests in Panel Data”, Applied Economics Quarterly, 60(4), 253-272.
Engle, R.F. and C.W.J. Granger (1987), “Cointegration and Error Correction: Representation, Estimation, and Testing”, Econometrica, 55(2), 251-276.
Falk, M. and M. Hake (2008), “A Panel Data Analysis on FDI and Exports”, FIW Research Report No. 012. Fisher, R.A. (1932), Statistical Methods for Research Workers, 4th Edition, Olliver and Boyd: Edinburgh. Granger, C.W.J. (1969), “Investigating Causal Relationships by Econometric Models and Cross-Spectral Methods”, Econometrica, 37(3), 424-438. Granger, C.W.J. (1988), “Some Recent Development in a Concept of Causality”, Journal of Econometrics, 39(1-2), 199-211.
Gries, T. and M. Redlin (2012), “Trade Openness and Economic Growth: A Panel Causality Analysis”, CIE Working Paper No. 52. Grossman, G.M. and E. Helpman (1997), Innovation and Growth in the Global Economy, MIT Press: Cambridge. Hadri, K. (2000), “Testing for Stationarity in Heterogeneous Panel Data”, Econometrics Journal, 3(2), 148-161.
Hamori, S. and N. Hamori (2010), Introduction of the Euro and the Monetary Policy of the European Central Bank, World Scientific: Hackensack. Harding, T. and B.S. Javorcik (2012), “Foreign Direct Investment and Export Upgrading”, Review of Economics and Statistics, 94(4), 964-980.
Harris, R. (1995), Using Cointegration Analysis in Econoetric Modelling, Prentice Hall Publishing: Essex. Helpman, E. (1984), “A Simple Theory of International Trade with Multinational Corporations”, Journal of Political Economy, 92(3), 451-471.
Helpman, E., M.J. Melitz and S.R. Yeaple (2004), “Export versus FDI with Heterogeneous Firms”, The American Economic Review, 94(3), 300-316.
Hirschman, A. (1958), The Strategy of Economic Development, Yale University Press: New Haven. Holtz-Eakin, D., W. Newey and H. Rosen (1988), “Estimating Vector Autoregressions with Panel Data”, Econometrica, 56(6), 1371-1395.
Hsiao, F.S.T. and M.W. Hsiao (2006), FDI, Exports, and Growth in East and Southeast Asia: Evidence from Time-Series and Panel Data Causality Analyses, Paper presented at International Conference on Korea and the World Economy V, 7-8 July. Im, K.S., M.H. Pesaran and Y. Shin (2003), “Testing for Unit Roots in Heterogeneous Panels”, Journal of Econometrics, 115(1), 53-74.
Johansen, S. (1988), “Statistical Analysis of Cointegration Vectors”, Journal of Economic Dynamics and Control, 12(2-3), 231?254. Johansen, S. and K. Juselius (1990), “Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money”, Oxford Bulletin of Economics and Statistics, 52(2), 169-210.
Kao, C. (1999), “Spurious Regression and Residual-Based Tests for Cointegration in Panel Data”, Journal of Econometrics, 90(1), 1-44.
Kao, C. and M-H. Chiang (2001), “On the Estimation and Inference of a Cointegrated Regression in Panel Data”, in: B.H. Baltagi, T.B. Fomby, R. Carter Hill (Eds), Advances in Econometrics, Non-Stationary Panels, Panel Cointegration, and Dynamic Panels, Vol. 15, JAI Press: Amsterdam. Lall, S. (1974), “Less Developed Countries and Private Foreign Direct Investment. A Review Article”, World Development, 2(4-5), 43-48.
Levin, A., C.F. Lin and J. Chu (2002), “Unit Root Test in Panel Data: Asymptotic and Finite-Sample Properties”, Journal of Econometrics, 108(1), 1-24.
Lucas, R.E. (1988), “On the Mechanics of Economic Development”, Journal of Monetary Economics, 22(1), 3-42.
Maddala, G.S. and S. Wu (1999), “A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test”, Oxford Bulletin of Economics and Statistics, 61(S1), 631-652.
Mark, N.C. and D. Sul (2002), “Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand”, NBER Working Paper No. 287. Markusen, J.R. (1984), “Multinationals, Multi-plant Economies and the Gains from Trade”, Journal of International Economics, 16(3-4), 205-226.
Martínez-Martin, J. (2010), “On the Dynamics of Exports and FDI: The Spanish Internationalization Process”, IREA Working Paper No. 10. Pagan, A.R. and M.R. Wickens (1989), “A Survey of Some Recent Econometric Methods”, Economic Journal, 99(398), 962-1025.
Pedroni, P. (1999), “Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors”, Oxford Bulletin of Economics and Statistics, 61(S1), 653-669.
Pedroni, P. (2001a), “Fully Modified OLS for Heterogeneous Cointegrated Panels”, in: B.H. Baltagi, T.B. Fomby, R. Carter Hill (Eds), Advances in Econometrics, Non-Stationary Panels, Panel Cointegration, and Dynamic Panels, Vol. 15, JAI Press: Amsterdam. Pedroni, P. (2001b), “Purchasing Power Parity Tests in Cointegrated Panels”, Review of Economics and Statistics, 83(4), 727-731.
Pedroni, P. (2004), “Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis”, Econometric Theory, 20(3), 597-625.
Phillips, P.C.B. (1995), “Fully Modified Least Squares and Vector Autoregression”, Econometrica, 63(5), 1023-1078.
Ramirez, M.D. and H. Sharma (2008), “Remittances and Growth in Latin America: A Panel Unit Root and Panel Cointegration Analysis”, University of Yale Working Paper No. 51. Reuber, G.L., H. Crookell, M. Emerson and G. Gallais-Hamonno (1973), Private Foreign Investment in Development, Clarendon Press: Oxford. Rodrik, D. (1999), The New Global Economy and Developing Countries: Making Openness Work, Overseas Development Council: Washington. Romer, P. (1986), “Increasing Returns and Long-Run Growth”, Journal of Political Economy, 94(2), 1002-37.
Romer, P. (1990), “Endogenous Technological Change”, Journal of Political Economy, 98(5), S71-S102.
Shihab, R.A., T. Soufan and S. Abdul-Khaliq (2014), “The Causal Relationship between Exports and Economic Growth in Jordan”, International Journal of Business and Social Science, 5(3), 302-308.
Stock, J.H. and M.W. Watson (1993), “A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems”, Econometrica, 61(4), 783-820.
Thalassinos, E.I. (2008), “Trends and Developments in the European Financial Sector”, European Financial and Accounting Journal, 2008(3), 44-61.
UNCTAD (2015), United Nations Conference on Trade and Development Data Center: Geneva. Vintila, D. (2010), “Foreign Direct Investment Theory: An Overview of the Main FDI Theories”, European Journal of Interdisciplinary Studies, 2(2), 104-110.
WDI (2015), World Development Indicators, The World Bank: Washington, DC.