Causal relationship between foreign direct investment, exports, stock market index and economic growth through nonparametric Wavelet Granger Causality Method in emerging markets: Evidence from fragile five economies

This study examines the causal relationship between foreign direct investment, exports, stock market index and economic growth in emerging markets particularly on Fragile Five economies through Nonparametric Wavelet Granger causality method. Methodology used in this study is a new approach of nonparametric Granger causality based on Wavelet transformation as it is an advanced causality method. This study uses quarterly data of Fragile Five economies: Indonesia, Turkey, India, Brazil and South Africa for the period 1991-2015. The findings suggest a bidirectional causality between economic growth, FDI, export and stock market index in Fragile Five economies however the direction and the magnitude of causality are different for each country. Therefore, there are some important policy implications to be encouraged through the integration of FDI, export and stockmarket together as the most important engine of the economy development with the global economy system. Keywords: Nonparametric Granger Causality, Wavelet Analysis, Fragile Five Economies, FDI, Export, Stock Market Index, Economic Growth