The effect of globalization on national economies remain a subject of empirical interest. Owing to the spillovers via globalization effects, a number of economies in the South Asian region have recorded phenomenal economic growth. However, the extent to which economic growth can influence development outcomes remains the issue of interest. Therefore, this study adds to the literature by examining the time and modulative effects of economic globalization on some direct regressors of economic growth. The study focused on eight South Asian countries from 1996 to 2019 for which data on globalization were sourced from Konjunkturforschungsstelle Globalization index, World Governance Indicators and International country risk database. A pooled autoregressive-distributed lag (ARDL) approach was utilized in addressing the objective of this study. Consequently, the findings suggest that while globalization influences economic growth positively, rising interest rates and inflationary pressures can unsustain this influence. Likewise, the modulated estimates show that economic globalization can be utilized as a tool to stimulate investment as well as to check corruption and subsequently sustain economic growth in South Asian economies.
Policy Implications
- The positive but insignificant globalization effects in sustaining real economic growth requires policy measures to stem inflationary pressures in South Asian economies
- South Asian countries should combine globalization process with low interest monetary policy regime. This will draw in investible funds from local and foreign sources to raise per capita income in the long-run.
- For long run sustainable economic growth, countries of the South Asian region should further integrate with the rest of the world while maintaining investment-friendly monetary policy of low interest rates.
- Economic globalization will benefit countries of South Asia in the presence of good governance. Thus, the policy of transparency, democratic norms and expansion of the civic space are part of the necessary elements that could guarantee sustainable economic growth as these countries maintain entry into the process of globalization.