The Relationship between Trade Openness, Foreign Direct Investment, Government Expenditure, and Economic Growth in ASEAN Countries

Abstract The paper attempts to examine the nexus between trade openness, foreign direct investment, government expenditure, and economic growth in nine selected ASEAN countries between 1994 and 2023. A panel dataset for the causality between trade openness, FDI, government expenditure, and economic growth of nine ASEAN countries, namely Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, the Philippines, Singapore, Thailand, and Viet Nam between 1994 and 2023 was gathered from the World Development Indicators. Further, the panel regression model was employed to estimate the nexus between these variables in each country both in the short and long run. Results also revealed that the rise in government expenditure may decelerate economic growth in the short run, while trade openness supports the growth of countries in the region in the long run. In terms of the model for each country, the effect of trade openness, foreign direct investment, and government expenditure on economic growth was controversial in specific countries. Findings stated that trade openness may facilitate the growth in Cambodia, the Philippines, and Singapore, and foreign direct investment promotes economic growth in only Thailand, suggesting important differences in structural characteristics and policy transmission mechanisms. However, the rise of government expenditure may discourage the growth of Cambodia, Malaysia, the Philippines, Singapore, and Thailand. The article contributes to propose policies to facilitate economic growth and achieve sustainable development for the region.