The Nexus between Economic Indicators and Economic Growth in Brazil

Abstract

The objective of the paper is twofold. First is to examine the relationship between economic indicators and economic growth of Brazil economy, second is to look the impact of foreign direct investment on Gross domestic product of Brazil economy. The time series data from 1986-2014 was used of the remittance, foreign direct investment, domestic savings and capital formation to know the impact on Gross domestic product of Brazil. Results have been analyzed by using advanced econometric tools like- unit root test (both ADF and PP), OLS methods and Granger causality test. The results confirmed that, both capital formation and Remittance have positive relationship with GDP, whereas FDI and savings show insignificant influence on GDP of Brazil. In order to minimize the gap between domestic saving and investment and to bring the technology and managerial know-how, remittance could play important role on the way of economic development of Brazil. Similarly the Capital formation is playing an important role in the economic development due to positive impact on GDP. Therefore, government should take pragmatic policy, develop infrastructure, stabilized the political environment, law and order situation.

Keywords: Gross Domestic Product, Unit Root test, Granger Causality, Brazil