Capital Markets & Economic Growth: A Tale of BRICS Countries

Abstract

The GDP growth of any economy acts as a proxy of the overall growth of that economy. This paper attempts to investigate the significance of economic growth based on economic factors. Several factors contribute to the economic growth. Moreover, foreign direct investment (FDI) bridges the gap of saving and investment in the capital formation and thus supports for economic growth. In this paper, we examine the significant effect of the economic indicators on the GDP growth and the extent of influence. The focus of this paper is also to check if the significant economic indicators of GDP growth is consistent across the economies. We consider the data of fifteen economic indicators for BRICS countries over a period of 1990 to 2018. For this purpose, we employ Karl Pearson’s correlation and regression model. The result reveals that final consumption expenditure, gross capital formation, general government final consumption expenditure affect the GDP growth of Brazil, gross capital formation, general government final consumption expenditure affect the GDP growth of Russia whereas the foreign direct investment, gross capital formation (annual % growth), gross savings (% of GDP) affect the GDP growth of China. The household final consumption expenditure per capita growth and gross capital formation affect significantly the GDP growth of India. Final consumption expenditure, household final consumption expenditure, gross savings (% of GDP), affects South Africa’s GDP growth. The result of this paper has important implications for the policy makers.