Economics at your fingertips  

Nexus between Economic Volatility, Trade Openness and FDI: An Application of ARDL, NARDL and Asymmetric Causality

Md. Qamruzzaman and Salma Karim
Additional contact information
Md. Qamruzzaman: Associate Professor, School of Business and Economics, United International University, Dhaka, Bangladesh.
Salma Karim: Professor, School of Business and Economics, United International University, Dhaka, Bangladesh.

Asian Economic and Financial Review, 2020, vol. 10, issue 7, 790-807

Abstract: The motivation behind this study is to examine whether regional economic volatility and trade openness has influenced the pattern of foreign direct investment (FDI) inflows in select South Asian countries during the period 1975?2019. In order to do so, we applied several nonlinear tests, including the unit root test, ordinary least squares (OLS) test, autoregressive distributed lag (NARDL) test, and causality test. The findings of the nonlinear unit root test suggested that the variables are stationary at the first deviation, following nonlinear systems. Furthermore, the presence of nonlinearity in empirical estimations has been proven through nonlinear OLS and Brock Dechert Scheinkman (BDS) tests. Referring to the results of the Wald test with NARDL, a long-term asymmetrical relationship between the research variables has been confirmed, and long-term and short-term asymmetry was also observed in all tested empirical models. Furthermore, the results of the study on directional causality and asymmetric assumption support the feedback hypothesis in explaining the directional causality between regional economic volatility, trade openness, and inflows of FDI.

Keywords: Foreign Direct Investments; Economic Volatility; Trade Openness; Nonlinear Unit Roots; Nonlinear Autoregressive Distributed Lag; Asymmetry Causality; South Asia. (search for similar items in EconPapers)
JEL-codes: O40 Q32 Q43 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Asian Economic and Financial Review is currently edited by Dr. Qazi Muhammad Adnan Hye

More articles in Asian Economic and Financial Review from Asian Economic and Social Society 2637 E Atlantic Blvd #43110 Pompano Beach, FL 33062, USA.
Bibliographic data for series maintained by Chan Hoi Yan ().

Page updated 2020-08-01
Handle: RePEc:asi:aeafrj:2020:p:790-807