Determinants of Economic Growth in BRICS Countries: A Panel Data Analysis Approach

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.