The Impact of Economic Freedom Indicators and Net Foreign Direct Investment on the Trade Balance of BRICS Economies during the period (2000-2022)

Abstract

This research examines the impact of economic freedom indicators and net foreign direct investment (FDI) on the trade balance of the BRICS countries during the period 2000–2022. The BRICS bloc is recognized as one of the most prominent emerging economic groups in the global economy. The study employs a quantitative inductive–analytical approach, using the Dynamic Ordinary Least Squares (DOLS) model to assess the long-run relationships among the variables under investigation. The results reveal a positive and significant relationship between both economic freedom and net FDI, on the one hand, and the trade balance, on the other hand, indicating that economic reforms and investment liberalization contribute to improved trade performance and enhanced external sustainability. Moreover, the findings show that international trade freedom and monetary stability are the most influential factors supporting trade surpluses, whereas government size, credit regulation, and labour market rigidity exhibit a negative relationship, which constrains competitiveness. The study concludes with several recommendations, notably the need to strengthen institutional reforms, improve the investment climate, and diversify the economic structure. These measures aim to reduce dependence on primary commodities and promote