COINTEGRATION BETWEEN GDP, ODA, FDI AND EXPORTS: EVIDENCE OF LAO PDR.
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Abstract
The objective of this study is to test the short-term and long-term links model between real gross domestic product (Ca), official development assistance from DAC countries to Laos (ODA), foreign direct investment (FDI) and exports (Ex). The researchers used time series data starting 1988 to 2019 (32 observations or samples) from the Bank of Lao PDR and Organization for Economic Co-operation and Development (OECD). This paper, we analyzed by using the Vector Error Correction Model (VECM) which Ca is the target variable equation because the causality between ODA still a controversial problem. Furthermore, some researchers suggest that ODA, FDI and Ex have the impact on GDP or GDP per capita, but some also suggests that GDP attract ODA, FDI and Ex. Thus, making the case of Lao PDR more clearly motivated me to analyze the cointegration between those indicators.
The results of empirical analysis indicated that there is a long-term causality among the proposed variables which also have a positive and negative causality which ODA and FDI have positive relationship, suggests that if they increase in ODA and FDI inflows it causes increase in real GDP per capita. While as the Ex has a negative relationship suggest that an increase in Exports will cause decrease in real GDP per capita which against economics theories, this may cause from the number of samples used in the study was small or inequality of income distribution. In terms of short-run, we also found that there is no bidirectional causal relationship but have unidirectional causal relationship that run from FDI to Ca, causal running from ODA and Ex to FDI and from ODA to Ex. Therefore, policymakers should promote and attract more FDI and ODA to stimulate the exports and economic growth.
Article history : Received 12 April 2021
Revised 20 June 2021
Accepted 23 June 2021
SIMILARITY INDEX = 0.00 %
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