A Study on the Interrelationships among Trade, Foreign Direct Investment, Human Capital, Financial Development and Economic Growth in Myanmar

This paper analyzes the factors associated with economic growth in Myanmar by extending the Trade-FDI-led growth model with human capital and financial development through a Vector Error Correction Model (VECM). Vector Error Correction Model is a form of Vector Autoregressive, which has additional restrictions due to the existence of non-stationary but cointegrated data forms. VECM model conducts the long-term equations between the test variables at different degrees of integration and tests the Granger analysis for multi cointegration. The findings confirm that FDI has a positive effect on GDP per capita growth in the long-run, and financial development has a negative long-run effect on GDP per capita. In the short-run, FDI and exports positively affect GDP per capita growth while imports negatively affects GDP per capita. The Granger causality test revealed that human capital is positively interrelated with the export industry while exports and FDI enhance GDP per capita. Overall, Myanmar’s economic growth appears as an export-FDI-led growth model. Therefore, export policy and foreign direct investment policy should be collectively promoted for economic growth in Myanmar.