Complementarity or Substitutability between Outward FDI and Exporting in Influencing Economic Growth: The BRICS Countries Analysis

Thobekile Qabhobho, Clement Moyo and Kunofiwa Tsaurai
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Thobekile Qabhobho: Department of Economics, Nelson Mandela University, Port Elizabeth, South Africa
Kunofiwa Tsaurai: Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

Economia Internazionale / International Economics, 2023, vol. 76, issue 2, 275-296

Abstract: The rise in outward foreign direct investment (OFDI) from developing countries has reignited the debates on its impact on domestic economies. However, there is lack of consensus on the complementary role of OFDI and exports in influencing economic growth. This article investigates whether OFDI and exports have a complementary relationship in affecting economic growth in the BRICS group of countries. For this purpose, the Pooled Mean Group (PMG) ARDL model – as developed by Pesaran et al. (1999) has been used to estimate the long-run and short-run relationship between the variables. The findings show that OFDI negatively affects economic growth, while exports positively impact economic growth in BRICS countries. Furthermore, the results also indicate that there is a complementarity relationship between OFDI and exports that promotes economic growth as indicated by a positive and significant interaction term between the variables. Policy implications and recommendations are outlined. Complementarità o sostituibilità tra gli investimenti diretti esteri in uscita e le esportazioni nei confronti della crescita economica: un’analisi dei paesi BRICS L’aumento degli investimenti diretti esteri in uscita (OFDI) da parte dei paesi in via di sviluppo ha riacceso il dibattito sull’impatto che questi hanno sull’economia dei paesi interessati. Permane comunque una mancanza di consenso sulla complementarità di questi investimenti e le esportazioni nei confronti della crescita economica. Questo articolo esamina se tra gli OFDI e le esportazioni vi è una relazione di complementarità nell’influenzare la crescita economica nei BRICS. A questo fine, è stato utilizzato il modello di Pesaran et al. (1999) – Pooled Mean Group (PMG) ARDL model – per stimare la relazione di breve e lungo periodo tra queste variabili. I risultati indicano che gli ODFI influenzano negativamente la crescita mentre le esportazioni hanno un effetto positivo su di essa nei paesi BRICS. Inoltre, dai risultati si evince che c’è una relazione di complementarità tra gli OFDI e le esportazioni che promuovono la crescita economica, come indicato da un termine di interazione positivo e significativo tra le variabili. Al riguardo si danno suggerimenti e raccomandazioni di policy.

Keywords: Complementarity; Substitutability; Outward FDI; Exports; Economic Growth; BRICS (search for similar items in EconPapers)
JEL-codes: C01 C23 F21 F23 (search for similar items in EconPapers)
Date: 2023
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