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Causal Relationship between Economic Growth, Financial Deepening, Foreign Direct Investment and Innovation: Evidence from China

Mollah Aminul Islam, Haiyun Liu, Muhammad Asif Khan, Sultanuzzaman MD Reza, Yassin Elshain Yahia and Layla Nasrin
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Mollah Aminul Islam: PhD Scholar, School of Economics, Huazhong University of Science and Technology, Wuhan, P.R.China
Haiyun Liu: Professor, School of Economics, Huazhong University of Science and Technology, Wuhan, P.R.China.
Muhammad Asif Khan: PhD Scholar, School of Economics, Huazhong University of Science and Technology, Wuhan, P.R.China
Sultanuzzaman MD Reza: PhD Scholar, School of Economics, Huazhong University of Science and Technology, Wuhan, P.R.China
Yassin Elshain Yahia: PhD Scholar, School of Economics, Huazhong University of Science and Technology, Wuhan, P.R.China
Layla Nasrin: Master Degree Candidate, School of Health Science, Wuhan University, Wuhan, P.R.China.

Asian Economic and Financial Review, 2018, vol. 8, issue 8, 1086-1101

Abstract: This research examines the cointegration and causal relationship between economic growth, financial deepening, foreign direct investment and innovation in the context of China. The empirical results of the ARDL Bounds test to cointegration and VECM Granger causality validate the cointegration and causal association among variables. The study offers policy implication to bring more depth to the financial system to elevate potential innovative environment through FDI. Moreover, to boost real growth through the creation of spillover effects and to enrich the absorptive capacity, the policymakers need to pay attention to financial institutions access, depth and efficiency.

Keywords: Economic growth; Financial deepening; Innovation; FDI; ARDL (search for similar items in EconPapers)
Date: 2018
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