FDI, trade and economic growth: A panel approach to EU and BRICS

Abstract

This chapter makes an empirical investigation to identify how globalization affects economic growth. Our study comprises of EU and BRICS countries in the time period 2000-2015. Specifically, we use Foreign Direct Investment (FDI) and international trade (sum of export and import) as two major forces of globalization. Our primary result from pooled cross-sectional analysis indicates positive and significant impact of globalization on growth of the selected economies. We take a step further and conduct panel data analysis on our dataset. After controlling for relevant macroeconomic variables and using appropriate estimation technique, our results show a very weak but positive impact of globalization on the economic growth of BRICS. However, we found the US growth rate as a strong predictor of economic growth for these countries which probably hints towards some spillover effects rather than the effect of globalization.