Economic growth is one of the goals of economic policy. The study analyzes the determinants of output for the BRICS-T country group during the period 1992-2019. The results of the analysis show that the inflation variable has no effect on output in the long run. Looking at the effects of other variables shows that all variables are statistically significant both in the short and long term. According to the results of the analysis, the most effective variable in the short run is the patent applications variable. In the study, openness variable and inflation variable were taken as explanatory variables to see the effect of macroeconomic policy intervention. The results of the analysis made with the pooled mean group method show that the variable that affects most the output is trade openness. Furthermore, it has been observed that the inflation variable included in the model as a macroeconomic policy variable has an effect on output in the short run but not in the long run.
TopIntroduction
In neo-classical growth models, the share of growth created by capital and labor in production is subtracted from the national income growth. The remainder is a growth driven by technology. This remainder is called total factor productivity. Solow, on the other hand, defined the part of the change in production that cannot be explained by input factors as 'Solow residual'. Under the assumption that technological development is considered an exogenous factor or constant, the production function is shown as follows:
Y = A. f (K, L)
Considering the production function Y = A f (K, L), it can be expressed in the following equation in which the increase in production is explained by the increase in the amount of capital and labor.
∆Y = (MPK. ∆𝐾) + (MPL. ∆L)
While (MPK. ∆K) expresses the share that the change in production is caused by the change in the amount of capital, (MPL. ∆L) indicates the share that the change in production is caused by the change in the amount of labor (Kılıç & Dilber, 2019).
According to Goel’s study (2011) on economic growth in BRICS-countries, since BRIC- countries show higher economic growth, there are significant differences within the group. It is revealed that China and Russia mostly have higher growth, India's growth process is varied and Brazil is not outperforming others.
According to Streltsov et al. (2021), the main factors that lead to the economic expansion of the BRICS-country group are predominantly labor and large economic resources. For example, Brazil and Russia mainly have large mineral reserves, while China and India have the advantage of cheap labor as well as resources at low prices. Finally, all BRICS-countries, except Brazil, exhibit very high investment rates.
As Shayanewako’s study (2018) shows BRICS-countries have attached importance to strengthening and expanding foreign trade since their establishment in 2006. The study conducted by Shayanewako (2018) on BRICS countries investigates the relationship between trade openness and economic growth for the period 1990-2017 using the Autoregressive Distributed Latency (ARDL) bounds test, Cointegration and Granger causality tests (1969). According to this study, a long-term relationship between trade openness and economic growth is revealed. The evidence obtained from the analysis shows that, with exception to China where there is a unidirectional causality between trade openness and output growth, there is bidirectional causality from trade openness to economic growth in BRICS-countries. Similar results are also shown by Mercan et al. (2013) study results. According to this study, there is a positive relationship between openness and economic growth in Brazil, Russia, India, China, and Turkey (BRIC-T) country group.
Kurt and Kurt (2015) in their study on innovation and labor productivity in BRICS-countries concluded that there is a positive causality relationship between the two variables, innovation and labor productivity.
Yapraklı (2007) analyzes the relationship between commercial and financial openness and economic growth in Turkey during the period 1990-2006. As the results show, trade openness has a positive effect on economic growth, whereas financial openness has a negative effect.
Erkişi (2018) analyzing the factors affecting economic growth in BRICS countries for both the long run and the short run for the period 1996-2016, concludes that the Morgan Stanley Capital International Index is statistically significant and is the only variable that positively affects GDP in both the long and short run. Money supply and foreign trade variables are statistically significant in the short run, but not in the long run. In the short run, foreign trade affects GDP positively, while money supply affects growth negatively. Credits are not statistically significant either in the short or in the long term.