The Effect of Foreign Direct Investment and Economic Freedom on Economic Growth: The Case of BRICS Countries

Abstract

This paper researches the interaction between economic freedom (EF), foreign direct investment (FDI) and economic growth in the five BRICS countries namely, Brazil, Russia, India, China and South Africa over the term 1995-2013. In order to trying the data, panel data analysis is exercised. The results indicate that whole index of EF is positively and acutely associated with economic growth, further, the results indicate that FDI is positively related and statistically significant determinant of economic growth. We find that EF and FDI has significant influence on economic growth. Besides, we decompose the EF index into the five categories constructing the index and observed that just index of size of government is negatively associated with growth.