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