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Causal Nexus Analysis of FDI, Trade Openness, Labor Force, Financial Development, and Economic Growth in Laos: An Empirical Study (2000-2018)

DOI : https://doi.org/10.36349/easjebm.2023.v06i09.002
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This research study explores the intricate web of causal relationships among foreign direct investment (FDI), trade openness, labor force participation, financial development, and economic growth in Laos. The analysis employs time series data spanning the period from 2000 to 2018, utilizing the advanced technique of bounds testing through the Auto Regressive Distributed Lag (ARDL) co-integration approach. Before delving into the econometric framework, it is imperative to ascertain the stationarity of the entire dataset to prevent the occurrence of spurious regression issues. To achieve this, we conducted the Augmented Dickey-Fuller (ADF) unit root test. The results of the unit root test indicate that the variables under consideration exhibit stationarity at both the level and first difference, providing a strong foundation for the subsequent ARDL modeling. The study's findings shed light on the intricate relationships between labor force participation, FDI, financial development, and economic growth. Notably, the research highlights a positive correlation among these variables, suggesting that an increase in labor force participation, FDI inflows, and financial development serves as a catalyst for heightened economic growth in Laos. However, an intriguing aspect of our findings is the negative impact of trade openness on economic growth, both in the short-run and long-run, a phenomenon warranting further investigation. This study contributes valuable insights to the understanding of Laos's economic dynamics and offers important implications for policymakers and stakeholders seeking to foster sustainable economic growth in the region.

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Dr. Afroza Begum

Lecturer, Dept. of Pharmacology and Therapeutics, Shaheed Monsur Ali Medical College & Hospital, Uttara, Dhaka-1230, Bangladesh

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