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Corresponding Author:
Roger Hosein, The University of the West Indies, Department of Economics, Kingston, Jamaica

Coauthors:
Kimbert Evans, Department of Economics, The University of the West Indies, St. Augustine Campus, Trinidad and Tobago
Regan Deonanan, Department of Economics, The University of the West Indies, St. Augustine Campus, Trinidad and Tobago

Foreign Direct Investments, Exports and Economic Growth in SIDS: Evidence from Santa Lucia

Volume 72 - Issue 1, February 2019
(pp. 47-76)
JEL classification: C32, F21, F43, O40
Keywords: ARDL, Exports, FDI, GDP, Saint Lucia, SIDS, Toda-Yamamoto

Abstract

This paper examines the causal relationships among FDI, exports, and GDP in SIDS using data for Saint Lucia over the period 1980-2015. Using the ARDL bounds test approach to assess cointegration, results indicate that the variables share a long-run relationship when GDP and FDI are the dependent variables. Employing the Toda-Yamamoto test to assess long-run causal linkages, results indicate bi-directional causality between GDP and FDI, unidirectional causality from exports to GDP, and, unidirectional causality from FDI to exports. Accordingly, this paper finds evidence of export led-growth and FDI-led growth in Saint Lucia. These findings suggest that Saint Lucia should continue policies aimed at attracting FDI and expanding the export sector to promote economic growth. Additionally, policies which can diversify the types of FDI that Saint Lucia is currently attracting may be important in promoting exports and spurring higher levels of export led-growth and FDI-led growth. This study has implications for Eastern Caribbean countries and SIDS in other regions.

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Foreign Direct Investments, Exports and Economic Growth in SIDS: Evidence from Santa Lucia

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Institute for International Economics of the Genoa Chamber of Commerce

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of the Genoa Chamber of Commerce