Relationship between Economic Growth and Capital Investment in Emerging Economies：Implications on Financing Policy

In modern economics, economic growth is often associated with consumption, investment, and employment. As a demand－related variable, capital investment is an important research object in economics. Particularly, countries need to increase investment to develop their economies under the current international circumstance. This paper selects major emerging economies, such as China, Russia, Brazil, India, South Africa, Indonesia, and Mexico, to analyze the relationship between capital investment and economic growth. Granger causality and vector autoregression model show bilateral causality between capital investment and economic growth for China, Russia, and South Africa. Economic growth of India, Indonesia, and Mexico contributes to the formation of capital, but not vice versa. With Brazil, significant causal relationship is not observed between economic growth and capital formation.