Role of FDI and Foreign Remittances in Boosting and Economic Growth: Evidence from Brazil

Abstract

The paper has two main objectives; (i) Firstly, to investigate the relationship between economic growth and economic indicators of Brazil economy, (ii) Secondly, to examine the impact of FDI on Gross domestic product of Brazil economy. The study employed time series data from 1986 to 2014 of the remittance, FDI, capital formation and domestic savings to know the impact on Gross domestic product of Brazil. The paper analyzed the growth and economy nexus by applying econometric models such as; Granger causality test, OLS methods and unit root test (both ADF and PP). According to empirical estimations, foreign remittances and capital formation has significant and positive contribution towards economic growth for Brazil. However, foreign direct investment and savings show insignificant response towards gross domestic product of Brazil economy. The Brazil economy needs massive reforms to properly utilize the foreign and domestic investments on industrial, agriculture, and technology sector. In addition, the capital formation is playing an important role in the economic development due to positive impact on economic growth. The study proposed some fruitful policy implication for Brazil to boost the economic growth and living standard of people.