Unpacking the Drivers of Economic Prosperity: Energy, Finance, Investment, and Trade in Belt and Road Economies

Abstract

Economic performance in Belt and Road Initiative (BRI) economies is shaped by the interplay of energy consumption, capital accumulation, financial development, foreign direct investment (FDI), and international trade. However, empirical evidence regarding their combined effects remains inconclusive, particularly when accounting for dynamic relationships and potential endogeneity. This study examines the associations between these determinants and GDP per capita in BRI economies using panel data from the World Bank's World Development Indicators database for 2000–2023. Pooled ordinary least squares (OLS), fixed effects (FE), difference generalized method of moments (DGMM), and system generalized method of moments (SGMM) estimators are employed to compare conventional and dynamic panel specifications. The results reveal substantial variation across estimation methods. Fixed capital formation exhibits a consistently positive and statistically significant association with GDP per capita, highlighting the importance of productive investment. Energy consumption demonstrates positive associations in OLS, FE, and DGMM models but a negative association in SGMM. Financial development shows positive coefficients in conventional models and negative coefficients in dynamic specifications. Meanwhile, FDI and trade openness exhibit positive and statistically significant associations in the GMM models, although these relationships are less consistent in conventional estimations. Nevertheless, diagnostic concerns regarding instrument validity warrant caution in interpreting the dynamic estimates. The study contributes an integrated assessment of economic determinants across BRI economies and highlights the importance of methodological robustness in evaluating economic performance. The findings suggest that policies promoting productive investment, energy efficiency, prudent financial development, and international economic integration should be supported by strong institutional frameworks.