Strategic Economic Management : ARDL Analysis of Trade, FDI, and Growth in G20 Nations
Authors
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Rajesh Kumar
Assistant Professor (Corresponding Author), Department of Economics, Institute of Management Studies, Ghaziabad - B School, Grand Trunk Rd, Industrial Area, Bulandshahr Road Industrial Area, Ghaziabad - 201 009, Uttar Pradesh. & Research Scholar, National Institute of Technology, Agartala, Barjala, Jirania, Agartala - 799 046, Tripura
https://orcid.org/0009-0009-8281-246X
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Debasis Neogi
Professor, Department of Management, Humanities & Social Science, National Institute of Technology, Agartala, Barjala, Jirania, Agartala - 799 046, Tripura
https://orcid.org/0000-0003-2229-9376
DOI:
https://doi.org/10.17010/pijom/2025/v18i7/174562Keywords:
ARDL, G20, FDI, GDP, VECM.JEL Classification Codes: C32, F13, F21, F43
Publication Chronology: Paper Submission Date : February 20, 2025 ; Paper sent back for Revision : May 5, 2025 ; Paper Acceptance Date : July 5, 2025 ; Paper Published Online : July 15, 2025
Abstract
Purpose : This study examined how trade openness interacted with foreign direct investment (FDI) within G20 countries and analyzed their combined impact on GDP growth. It aimed to explore immediate and long-term relationships to inform sustainable growth strategies.
Design/Methodology/Approach : The analysis employed the autoregressive distributed lag (ARDL) methodology, complemented by Johansen cointegration tests, vector error correction model (VECM), and Granger causality tests for robustness. Time-series data from the World Development Indicators (WDI) were used to assess the effects of trade openness on FDI inflows and GDP growth across G20 nations. The study considered data from 1990 – 2019.
Findings : The findings indicated that trade openness maintained a long-run equilibrium relationship with GDP, highlighting that liberal trade policies contributed positively to FDI and economic performance. However, the short-run dynamics were marked by instability due to geopolitical uncertainties, exchange rate fluctuations, and institutional weaknesses. The results also revealed immediate causal linkages between trade openness and GDP.
Practical Implications : The results suggested that G20 policymakers should prioritize reducing non-tariff barriers and improving regulatory transparency to attract FDI and sustain growth. The ARDL-based insights provided concrete guidance for shaping effective trade and investment strategies.
Originality/Value : This research used advanced panel econometric techniques to offer empirical evidence of time-dependent, reciprocal relationships between trade openness, FDI, and GDP growth. It contributed to the trade-growth literature by clarifying how trade liberalization could drive growth via investment channels and institutional reform.
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