Does Economic Freedom Influence the FDI–Growth Nexus in ASEAN Economies?

Abstract

Authors examine the role of economic freedom in explaining the spillover of foreign direct investment (FDI) on economic growth in Association of Southeast Asian Nations (ASEAN) countries. Authors extend the analysis to the roles of human capital and financial institutions in the FDI–growth nexus. Authors employ two-stage least squares regression to analyse a panel data set of ASEAN countries over 26 years. They find that the positive relationship between FDI and economic growth can be explained by higher economic freedom along with improvements in the quality of human capital and financial institutions. They also provide the policy implications of our findings. JEL Classification: F20; F21; O40