This study examines the causal relationship between foreign direct investment and economic growth. Methodology is based on the Toda-Yamamoto test for causality relationship and the bounds testing (ARDL). Time-series data covering the period 19702005 for Malaysia, the study found, in the case of Malaysia there is no strong evidence of a bi-directional causality and long-run relationship between ...

We develop an overlapping generations model with re-tradeable paper assets and capital accumulation to analyze the interaction between the real economy and an international asset market. The world consists of two homogeneous countries, which differ only in their initial levels of capital. Consumers who live for two periods transfer wealth over time and across countries by holding international ...

There is strong evidence that exporting firms are better. This correlation can potentially arise from many alternative casual models. In this paper, we utilise the natural experiments offered by transitioning into export in a dataset of Indian firms from 1990 to 2011, where each firm which made the transition is matched against one which did not. While exporting firms become bigger, there is no...

This paper presents a simple model of the world economy, in which productivity gains in manufacturing are responsible for the global trend of manufacturing decline, and yet, in cross-section of countries, faster productivity gains in manufacturing do not necessarily imply faster declines in manufacturing. In doing so, it aims to draw attention to the common pitfall of using the cross-country ev...

In a world where poor countries provide weak protection for intellectual property rights, market integration will systematically shift technical change in favor of rich nations. For this reason, free trade can increase international income differences. At the same time, integration with countries where intellectual property rights are weakly protected can have a large adverse effect on the worl...

This paper identifies a flaw in the infant industry argument that previous literature has ignored. A simple model first replicates the infant industry logic but subsequently shows that, in the presence of a ‘traditional technology’ with poor growth potential, the infant-industry logic is likely to fail. Under protectionism domestic producers substitute advanced technologies with the low-growth ...

The paper estimates an empirical relation based on Krugman’s “technological gap” model to explore the influence of the pattern of international trade and production on the overall productivity growth of a developing country. A key result is that increased import competition in medium-growth (but not in lowor highgrowth) manufacturing sectors enhances overall productivity growth. The authors als...

This paper explores heterogeneity in the openness-productivity growth relationship, specifically whether the productivity payoffs from openness or trade liberalisation are conditioned by the quality of a country’s institutions and the extent of natural barriers. The paper endogenously searches for the type of heterogeneity; what variable might be used to capture the heterogeneity and with what ...

In a two-country infinite-horizon model, with two traded goods and two factors of production and no international borrowing and lending, there is no convergence of incomes if there is factor-price equalization. With factor-price equalization, the Euler equations of the two economies become identical. I show that in such a set-up if agents have a non-zero probability of death, then we do get con...

We investigate the effect of a stock market liberalization on industry growth in emerging markets. Consistent with the view that liberalization reduces financing constraints, we find that industries that are more externally dependent and face better growth opportunities grew faster following liberalization. However, this growth increase appears to come from an expansion in the size of existing ...