Abstract
AbstractA better functioning industrial sector matters directly for growth and contributes indirectly to poverty alleviation, unemployment reduction, trade promotion, exchange of goods and services, increased per capital income, GDP growth and so forth. in developed and Least developed countries (LDC). Nonetheless, after global financial crisis and fall of Bretton wood system a new debate was generated to re‐examine the issue after the implementation of financial liberalization policies in different economies. Therefore the present research focuses on examining the predominant determinants of industrial developments for a sample of developed economies and check the comparison between European Union (27 Countries) and United Kingdom. The explicit aim of the present research is to investigate the association between capital account openness (CAO), trade openness (TO), equity openness (EO) and industrial development (IDV) for economies of Europe (EU without UK) and United Kingdom (UK). Time series data set over 1986 to 2017 was employed for empirical analysis. Industrial development was measured by industry value added; KAOPEN as a measure of CAO, TO measured by the ratio of the sum of imports and exports relative to GDP and EO measured by market capitalization divided by GDP. The data sources predominantly included International Financial Statistics and World Development Indicators. Stationarity of data was measured through augmented Dickey–Fuller test, OLS regression was used to examine the association and percentage variation between the study variables. Findings reported only EO and TO as significant predictor of industry development in case of EU. However, EO, TO and CAO does not contribute as a significant determinant in case of United Kingdom. Lastly, the study also explains tremors, subsequent effects and magnitudes, intra‐ and inter‐reliance of constructs under consideration by employing vector auto‐regression (VAR), impulse response function and variance decomposition.
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