Determinants of economic growth – A cross-country analysis

Abstract

Abstract The current study aims to uncover the important economic factors that affect how quickly countries with various income levels grow. To examine the causal and cointegration relationship, the following variables are taken: Gross Domestic Product (GDP), Gross Domestic Savings (GDS), Foreign Direct Investment (FDI), Government External Debt (ED), Personal Remittances (PR), Government Final Consumption Expenditure (GFCE), Private Final Consumption Expenditure (PFCE), Net Official Development Aid (NODA), and Consumer Price Index (CPI). The results are obtained using the ARDL Bounds Test, Engle-Granger Causality Tests, and Error Correction Models (ECM). The findings provide substantial evidence in favor of the traditional theories of economic growth, which contend that domestic savings account for a large portion of an economy's growth rate. Results from all economic classes show that saving propels the economy except in the least-developed countries, where external debt drives the economies.