Abstract
Using time-series and panel data from 1986 to 2004, this paper examines the Granger causality
relations between GDP, exports, and FDI among China, Korea, Taiwan, Hong Kong, Singapore, Malaysia,
Philippines, and Thailand, the eight rapidly developing East and Southeast Asian economies. After
reviewing the current literature and testing the properties of individual time-series data, we estimate the
VAR of the three variables to find various Granger causal relations for each of the eight economies. We
found each country has different causality relations and does not yield general rules. We then construct the
panel data of the three variables for the eight economies as a group and then use the fixed effects and random
effects approaches to estimate the panel data VAR equations for Granger causality tests. The panel data
causality results reveal that FDI has unidirectional effects on GDP directly and also indirectly through
exports, and there also exists bidirectional causality between exports and GDP for the group. Our results
indicate that the panel data causality analysis has superior results over the time-series causality analysis.
Economic and policy implications of our analyses are then explored in the conclusions.

# 2006 Elsevier Inc. All rights reserved.
JEL classification : C33; C32; F43; F21; O11

Keywords: FDI, exports, and GDP; Panel data causality analysis; Granger causality analysis; Economic development;
East and Southeast Asia

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