Link among Domestic Investments, Exports and Economic Growth: New Evidence from Australia

In this study, we conducted a comprehensive analysis of the interplay between domestic investments, exports, and economic growth in Australia from 1972 to 2021. The Vector Error Correction Model (VECM) provided insights into short-term and long-term dynamics, highlighting how deviations from equilibrium are corrected over time and the nature of these interactions. Our findings underscore that domestic investments positively impact GDP, with a 1% increase in investments correlating to a 0.11% increase in GDP in the long run. Conversely, the study found a negative relationship between exports and domestic investments, suggesting that growth in exports does not necessarily lead to increased domestic investment. These insights are crucial for developing balanced economic policies that support both investment and export growth while ensuring sustainable economic development.