Outward FDI, human capital and economic growth in BRICS countries: an empirical insight

Abstract

This paper examines the impact of outward FDI on human capital, gross capital formation, inflation, trade openness, and economic growth of BRICS countries over the period 1985–2017. In order to measure the outward FDI impact upon the set of regressors and to find out short vs long run relationship, we have used the familiar Fisher and Johansen’s Co-integration tests, and vector-error correction model. Empirical results exhibit that outward FDI has a positive impact on human capital during the short run, whereas in the long run this impact is quite insignificant. Furthermore, results exhibit that outward FDI has substantially raised the economic growth of BRICS countries both in short and long run. Moreover, panel causality result reveals that there is a bidirectional relationship between outward FDI and human capital, indicating that if there is an improvement in the quality of skilled labour through education, it would facilitate to raise the outward investment.

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