Abstract

This study investigates the driving forces of economic growth in BRICS (Brazil, Russia, India, China, and South Africa) countries. Therefore, explanatory variables including foreign direct investment, investment in information and technology, inflation rate, economic size and domestic credit provided to private sectors are utilized. In addition, unit root tests and the error correction model are employed on a data collected from 2000 till 2014. Results indicate that variables are stationary and integrated at the first order. On the other hand, foreign direct investment found to have a positive and significant effect on economic growth in the long-run. In contrary, investment in information and technology, inflation rate and economic size exhibited a negative and significant effect on economic growth. The short-run results show that the economic size variable has a negative and significant effect on economic growth, while the rest of the other variables found to be insignificant. The findings are consistent with previous literatures suggesting that BRICS policymakers must encourage foreign direct investments and eliminate any obstacles in order to achieve a high and sustainable economic growth.

Highlights

  • Economic growth of countries is a very controversial and debatable subject that has been investigated thoroughly in the literature

  • The world was baffled as a result of the economic growth that each of China and India were achieving during the financial crisis of 2008 while the rest of the industrialized economies went to a deep recession

  • The results show that the null hypothesis of Jarque-Bera test cannot be rejected for all the variables except for economic growth for Russia, inflation in Brazil and South Africa

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Summary

Introduction

Economic growth of countries is a very controversial and debatable subject that has been investigated thoroughly in the literature. This study selected BRICS countries for several positive reasons: i- they constitute a large part of the globe in terms of land and population (approximately half of the world population); ii- they are rich in human and natural resources; and iii- they have good and developed educational systems that will provide a skilled labor force; iv- they constitute one fourth of the world gross domestic product which make them a huge economic power that can be reckoned with This could give them comparative advantages in many ways in comparison with the European Union and the United States.

Literature Review
Data and Research Methodology
Descriptive Statistics
Correlation Analysis
Unit Root Test
The Error Correction Model
Conclusion
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