Trade Openness And Economic Growth Experience In Brics Countries

Abstract

In this research paper explores the growth experiences of the “BRICS nations (Brazil, Russia, India, China, and South Africa)” by analyzing their rapid development's key drivers, challenges, and implications. The relationship between economic growth and trade openness within the BRICS countries is analyzed. The study employs a panel vector autoregressive (PVAR) model in the Generalized Method of Moments (GMM) framework, data from 1990 to 2020 is taken annually. The variables of interest include GDP capita, trade openness, foreign direct investment (FDI), government expenditure, and investment.

The empirical results show that per capita GDP and investment are positively correlated, while trade openness is negatively correlated with per capita GDP. The study reveals the significance of the economic factors of per capita GDP, trade openness, foreign direct investment, government expenditure, and investment with each other and analyses causality relationships. Granger causality tests suggest bidirectional causality between per capita GDP and trade openness, with GDP per capita, investment, and trade openness and government expenditure. Additionally, there is unidirectional causality in several relationships among these economic factors within the BRICS nations.

The impulse response analysis demonstrates the immediate and lagged effects of shocks in FDI, investment, trade openness, and government expenditure on GDP per capita. The variance decomposition analysis provides insights into the percentage contributions of these variables to the overall variance in each economic indicator.