How trade and foreign investment affect the growth of a small but not so open economy: Australia?

Krishna G. Iyer, Alicia N. Rambaldi, Kam Ki Tang

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

Abstract

This article analyses the impact of trade and foreign investment on a small but not so open economy, Australia, whose growth rate outpaced the majority of the OECD countries in the last decade. We model five channels of outward orientation: exports, imports, foreign direct investment, foreign portfolio investment and other foreign investment. A cointegrated vector autoregressive model, complemented by a robust Granger noncausality test, is specified to identify permanent channels of outward orientation. Imports and direct investment are found to have a growth effect in the long run. The effect of imports is almost three times that of direct investment.

Original languageEnglish
Pages (from-to)1525-1532
Number of pages8
JournalApplied Economics
Volume41
Issue number12
DOIs
Publication statusPublished - 2009
Externally publishedYes

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