Macroeconomic Determinants of Economic Growth in Developing-8 Countries: Panel Cross-Sectionally Augmented ARDL

Abstract

Research Originality: This research is original in its examination of the impact of macroeconomic determinants on economic growth in Developing-8 countries, which accounts for cross-sectional dependence and country heterogeneity. Research Objectives: The study aims to analyze the short-run and long-run effects of external debt, exchange rates, foreign direct investment, inflation, and balance of trade on economic growth in selected Developing-8 countries over the period 1997–2024. Research Methods: The study employs a Cross-Sectionally Augmented ARDL model combined with the Error Correction Model by using secondary panel data from six members of the Developing-8 countries to capture dynamic relationships and long-run equilibrium, supported by unit root, cross-sectional dependence, and robustness tests. Empirical Results: The findings indicate that external debt and exchange rates have positive short-run effects on growth, while inflation and the trade balance have negative immediate effects. Foreign domestic investment shows no significant short-run effect but becomes positive in the long run, and the error correction term confirms a stable long-run relationship. Implications: The results suggest that policymakers should ensure sustainable external debt management, maintain exchange rate stability, enhance the effectiveness of foreign domestic investment, and control inflation to support long-term economic growth in Developing-8 countries. JEL Classification: E31, F31, F34, O47 How to Cite:Nehe, R. L., & Suhartoko, Y. B. (2024). Macroeconomic Determinants of Economic Growth in Developing-8 Countries: Panel Cross-Sectionally Augmented ARDL. Signifikan: Jurnal Ilmu Ekonomi, 15(2), 339-354. https://doi.org/10.15408/sjie.v15i2.50607.