Analysing economic growth of Sri Lanka using geometric distributed lag approach

Abstract

The purpose of this research study is to examine the contributions of macro-economic various variables on economic growth of Sri Lanka, using the geometric distributed lag model. The analysis was carried out for the annual data from 1980 to 2018 of variables: Gross Domestic Product (GDP), Consumption, Consumer Price Index (CPI), Investment, Expenditures, Trade balance and Foreign Direct Investment (FDI). Stationary properties were checked by ADF unit root test and the Granger causality test were performed to assess the causal relationship between variables. The test results revealed that, consumption, expenditure, consumer price index and investment have positively and significantly impact on economic growth of Sri Lanka. Whereas foreign direct investment has negatively and significantly impact on the economic growth of Sri Lanka. The causality results confirmed that the existence of unidirectional causality from economic growth to expenditure, CPI, FDI, investment and trade balance. However, the existence of bidirectional causality between economic growth and consumption.