Dynamic Relationship between Growth, Foreign Direct Investment and Exports in the US : An Approach with Structural Breaks

One of the well-studied subjects in the development economics literature is the relationship between foreign direct investment (FDI) and economic growth. Recently, we have a renewed interest in growth determinants and the considerable research on externality-led growth, with the advent of endogenous growth theories (Barro, 1991; Barro and Sala-i-Martin, 1995). Under that framework it's more plausible to include Foreign Direct Investments as one of the determinants of long run economic growth. In this current paper we investigate the relationship (long-run and short-run) between economic growth FDI and exports for the economy of USA. To achieve this objective the Johansen Maximum likelihood procedure is being used. Then Bai Perron test is being applied to test the possible structural breaks. Our estimated results from the Johansen procedure show that there is one cointegration vector. Bai Perron's test proposes two structural breaks. These structural breaks for the economy of USA occurred in 1981 and 2000. Furthermore, according the block exogeneity Wald test we found causality from Exports to GDP and to Foreign Direct Investments. Also we have causality from GDP to Foreign Direct Investments