Openness and Economic Growth: Empirical Evidence On The Relationship Between Output, Inward FDI, and Trade

Abstract

The relationship between openness and economic growth in developed anddeveloping countries has been of continuing interest in both the theoretical andempirical literature. In this paper. we employ a vector autoregressive (VAR)model and error correction techniques to test for the existence and nature of thecausal relationship between output level, inward FDI and exports across across-section of both developed and developing countries using data from 1960-2001.Our main objective is to analyze the extent and sources of internationallinkages between openness and economic performance. The evidence supportshi-directional causality between exports growth and economic growth; the economicgrowth and FDI relationship has mixed results.