Financial Development, FDI and Trade Openness as Drivers of Economic Growth Evidence from BRICS

Abstract

The BRICS nations are representing a significant and evolving force in the global economy. Collectively, these nations account for a substantial portion of the total world's population, approximately 40-45%, and contribute about 25% of nominal global Gross Domestic Product (GDP). The study examines the influence of financial development, foreign direct investment and trade openness on economic growth in BRICS countries over the period 2001-2023 using balanced panel data and also finds out the causal relationship among them. Pedroni and Kao Residual cointegration tests have been used to detect long-run relation among the selected variables and Granger causality test has been conducted as well. The result suggesis economic integration of an economy with global markets is made possible through flow of investment and several political and institutional factors like government's stability and policies, transparency, strong institutional quality will become the deciding factors in the paving the way for smooth trade openness. As a whole the study aims to contribute to the academic discourse on economic growth in emerging markets, offering valuable insights for researchers, policymakers, and practitioners alike. By elucidating the intricate relationships between finuncial development, FDI, and trade openness, this research aspires to inform the design of cffective economic policies that can enhance the growth poicntial of both existing und new BRICS nations in the years to come.