Causality test among foreign direct investment, trade openness and economic growth: recent evidence from BRICS and MINT countries

Abstract

This study attempts to find new evidence of causality between foreign direct investment, trade openness, and economic growth for BRICS and MINT countries between 1990-2021 using the Dumitrescu-Hurlin panel causality test. We first check whether there is a cross-sectional dependence between the countries using different cross-sectional dependence tests. After we find out there is cross-sectional dependence, we perform the CIPS unit root test. All variables are stationary at their first differences, so we applied the Dumitrescu-Hurlin panel causality test. There is bi-directional causality between trade openness and economic growth only for MINT countries. For BRICS, we found unidirectional relationships between economic growth and foreign direct investment and trade openness to economic growth. There is a unidirectional relationship from trade openness to foreign direct investment for both country groups.