Contributions of Foreign Direct Investment and International Trade on Economic Growth in Emerging Markets and Developing Economies
Year: 2025
Type: article
Abstract: In the context of deepening globalisation, Emerging Markets and Developing Economies (EMDEs) are increasingly asserting their pivotal role in global economic growth. According to the International Monetary Fund classification, EMDEs are a diverse group of countries in terms of size and development levels, yet they share common characteristics such as high growth rates, large market potential, and increasing international integration. Acknowledging this role, this research was undertaken to quantitatively evaluate the effects of Foreign Direct Investment (FDI) and global trade on economic growth in EMDEs during the 1994–2023 period. Based on panel data from the World Bank’s World Development Indicators, the study applies modern econometric methods such as OLS, FEM, REM, and GMM to ensure accuracy and reliability in estimation. Empirical results show that international trade has a clear positive impact on long-term economic growth by expanding markets, increasing resource allocation efficiency, and promoting technological innovation. Meanwhile, FDI not only supplements investment capital but also acts as a channel for transferring technology, management skills, and global production linkages – particularly effective in countries with transparent investment environments and stable institutional systems. These findings not only enrich the theoretical basis of the role of FDI and trade in economic growth but also hold significant practical value for policymaking in EMDEs. Effectively leveraging these two factors can become a strategic lever to help these countries achieve sustainable growth, narrow the development gap, and enhance global competitiveness.
Author: Linh DT Trinh
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $500
OpenAlex ID: W4413851801