Foreign Direct Investment, Financial Development, International Trade and Energy Consumption: Panel Data Evidence from Selected ASEAN Countries

Abstract

The main purpose of this study is to examine the linkage among energy consumption (EC), foreign direct investment (FDI), financial development (FD) and trade for the selected ASEAN countries namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand. After employing appropriate tests of stationarity, long-run-relationship and Granger causality test reveals that there exists significant long-run relationship among all explanatory variables namely FDI inflows, trade, FD and EC. The autoregressive distributed lag bound tests approach further confirms the long-run relationship among set of regressors. Results on Granger causality reveal that in the short-run unidirectional causality running from FDI inflows to EC, EC to FD, and EC to trade. Whereas, results also show that there exists bidirectional causality between trade and EC, EC and FDI, trade and FDI, EC and FD, trade and FD during the period under the study. The empirical results reveals that policy makers needs to formulate appropriate and prudent policy to encourage FDI inflows, improve financial sector development, expand exports volume and sustained energy supply, while keep in mind to achieve sustainable economic growth and development in the ASEAN region

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