Does Oil Price and Trade Openness Nexus along with Foreign Direct Investment have Influence on Economic Growth in Thailand

Abstract

The objective of this research is to analyze the conceivable cointegration and direction of causality among the oil price, trade openness, foreign direct investment and the growth rate in Thailand, using the time series data from 1974 to 2018. In addition to these variables’ fiscal development and inflation are also employed to observe the influence of financial openness on economic growth. Johansen cointegration test is utilized to detect long-run relationship incorporated with the vector error correction for the short-term association. Further, granger causality is utilized to determine the direction of causality among the contending variables. The outcomes of Johansen and vector error confirms the short and long-term affiliation among variables in Thailand. The coefficient of VECM (Wald test) detect the cumulative influence on the growth rate. The estimations of granger causality affirmed that oil price, inflation, fiscal development via trade, granger cause the growth rate and the fiscal development and foreign direct investment granger causes the growth rate in bi-direction and uni-direction, respectively. The study suggests, based on the impulse response function (under the consideration of the behavior of variables) government should liberalize trade openness as it fortifies the position of Thailand in the neighbored.