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Corresponding Author:
Clement Moyo, Department of Economics, Nelson Mandela University, Port Elizabeth, South Africa

Coauthors:
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

Complementarity or Substitutability between Outward FDI and Exporting in Influencing Economic Growth

October 28, 2022
JEL classification: C01; C23; F21; F23
Keywords: Complementarity; Substitutability; Outward FDI; Exports; Economic Growth; BRICS

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.

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Complementarity or Substitutability between Outward FDI and Exporting in Influencing Economic Growth

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Institute for International Economics of the Genoa Chamber of Commerce

Institute for International Economics
of the Genoa Chamber of Commerce