The study used panel data from 1998 to 2014 among 48 different countries to determine the relationship between foreign direct investment and corruption. For identifying the relationship, the study employed random effect model (REM), feasible general least squares method (FGLS) and panels corrected standard errors (PCSE). The results of the three panel estimation methods reveal that the variable of corruption is statistically significant at 1%, but negative relations between corruption and FDI results were determine by using REM, FGLS and PCSE estimation methods in three different regions (South and South-East Asia, Latin America, the Caribbean and Africa). It interprets that 1% decrease in the level of corruption may leads to about 8.15, 9.25 and 11.5% increase in FDI inflows by using REM, FGLS and PCSE respectively. Other control variables like gross domestic product per capital (GDPPC), gross domestic product growth rate (GDPG), population growth rate (POPG), urban population growth rate (UPOPG), trade openness, tele-density, gross school enrolment in primary (GSEP), agglomeration, bureaucracy (BURA), law and democracy are positively statistically significant as expected and risk and inflation are negatively statistically significant.

No abstract

Using panel data analysis, it is an attempt to estimates the significance of institutional quality and economic freedom on foreign direct investment for a sample of 79 developing countries from 1998 to 2014. Panel unit root, pedroni residual cointegration test, vector error correction model, generalized least square (GLS), feasible GLS (FGLS), pooled OLS, random effect, fixed effect, poisson regression, prais-winsten, generalized method of movement (GMM) and generalized estimating equation (GEE) method are utilizing for estimates the importance of institutional qualities and economic freedom for facilitating foreign direct investment. VECM confirms that there is a long run relationship among the tested variables means that commensurate institutional quality and substantive economic freedom stimulates foreign direct investment. According to the OLS method ,for the institutional quality the coefficient implies that a one standard deviation improvement in political stability and absence of violence, government effectiveness, regulatory qualities, rules of law and control of corruption increases FDI by 24.6%, 31.6%, 12.8%, 23.9% and 37.7% and on the other hand for the economic freedom , the coefficient implies that a one standard deviation improvement in business freedom, trade freedom, government size, investment freedom, property rights, freedom from corruption, labor freedom, financial freedom, fiscal freedom, monetary freedom increases FDI by 28.4%, 32.7%, 29.5%,22.8%, 29.0%, 36.4%,29.3%, 37.5%, 46.1% and 38.2% respectively. By using the other methods like random effect, fixed effect, poisson regression, prais-winsten and generalized estimating equation (GEE) method explores that both the institutional quality and economic freedom are influencing on FDI in the developing countries.