Foreign direct investment, trade openness and economic growth in pakistan and turkey: an investigation using bounds test

In the literature empirical evidences regarding export-led growth (ELG), FDI-led exports, and growth-driven exports (GDE) hypotheses have been mixed and inconclusive. This paper uses the autoregressive distributed lags (ARDL) model (Pesaran and Shin, Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, 1990) and tests the existence of long run equilibrium relationship between the determinants of growth during the period 1975-2004 for Pakistan and Turkey. The results indicate that in the short run there is bi-directional causal relationship between trade openness and exports for Pakistan and FDI and exports relationship for Turkey. The long run relationship results support the growth-driven exports hypothesis for Turkey and openness-growth nexus in Pakistan.