Foreign Direct Investment and Economic Growth in BRICS Economies: A Panel Data Analysis

Abstract

The research paper is an attempt to examine the relationship between foreign direct investment (FDI) and economic growth in the five BRICS economies namely, Brazil, Russia, India, China and South Africa over the period 1989-2012. The empirical methodology cointegration and causality analysis at panel level is applied. The results confirm that foreign direct investment and economic growth are cointegrated at the panel level, indicating the presence of long run equilibrium relationship between them. Results from causality tests indicate that there is long run causality running from foreign direct investment to economic growth in these economies. It is thus important that policymakers to remove obstacles to FDI inflows and improve the respective absorptive capacity in order to reap maximum positive growth effects.