Interaction of Economic Systems in the World under the Influence of Global Trends: The Role of International Trade and Investment

ENG: This study explores that how Foreign Direct Investment and trade openness impact the economic interaction by considering economic globalization, as assessed by the KOF index. The basic idea endogenous growth theory is applied globally from 2001 and 2021. The study utilizes the econometric techniques of three-stage least squares and seemingly unrelated regression. The findings suggest that foreign direct investment play a significant role in fostering economic interaction inside specific countries. There is a strong and positive relationship between foreign direct investment and economic interaction. Foreign Direct Investment often serves as the main channel via which advanced technology are transferred to countries. The results indicate that the advantages of this venture would be greatly upgraded in the host country with a more grounded and more skilled labor force. Furthermore, the results suggest that foreign direct investment promotes domestic investment. For FDI-driven growth to occur, it is necessary to have institutional stability and sound macroeconomic policies in place. Our findings indicate that global economic connection can be promoted by reducing the inflation rate, tax collection problem, and government consumption.