Factors Affecting Foreign Direct Investment Inflows: A Longitudinal Study on Bangladesh

Das, Shilpi; Das, Sumon

doi:10.2139/ssrn.3605607

Cited by 3 publications

(4 citation statements)

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“…This finding is not consistent with some previous studies, where the impact of institutional quality was found to be ambiguous. Some of these studies are Kim (2010), Das and Das (2017), Gondim et al (2017) and Al-Fawwaz (2018). It follows that institutional quality needs to be improved upon by reforming the political structures and regulatory institutions. The study also shows that openness of the economy tended to discourage divestment of FDI, but its impact is not strong enough to check the effect of macroeconomic performance and institutional quality.…”

Section: Structural Stability and Policy Implicationsmentioning

confidence: 99%

Section: Structural Stability and Policy Implicationsmentioning

confidence: 99%

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Macroeconomic and institutional conditions: the drivers behind divestment of FDI in Sub-Saharan Africa

Edo

Nnadozie

2022

JCEFTS

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Purpose The purpose of this paper is to determine how macroeconomic performance work with institutional quality influences divestment of foreign direct investment (FDI) in Sub-Saharan Africa, in the short and long run. Design/methodology/approach This paper investigates divestment of FDI in Sub-Saharan Africa, within the period 1980–2020. The investigation is undertaken by first comparing the trend with what is obtained in other economic regions of the world. The factors behind the divestment are subsequently investigated, using the vector error-correction model. Findings In the comparative analysis, Sub-Saharan Africa and other regions are observed to have witnessed sustained divestment in recent years. The estimation results of the model reveal that macroeconomic performance and institutional quality are the predominant drivers behind the divestment. Research limitations/implications The findings, however, do not conform to the neoclassical theory that lays emphasis on investment return as the fundamental factor influencing investment. Long-run structural stability is also established; hence, the results may be considered suitable for predicting future divestment in the region. Practical implications In view of the empirical findings, macroeconomic performance and institutional quality need to be improved to ameliorate FDI divestment in Sub-Saharan Africa. Originality/value There is paucity of research works on divestment of FDI in Sub-Saharan Africa. Again, there is paucity of works on how macroeconomic and institutional conditions work together to influence divestment. This study provides some evidence to bridge the perceived gaps.

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Section: Structural Stability and Policy Implicationsmentioning

confidence: 99%

Section: Structural Stability and Policy Implicationsmentioning

confidence: 99%

Macroeconomic and institutional conditions: the drivers behind divestment of FDI in Sub-Saharan Africa

Edo

Nnadozie

2022

JCEFTS

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“…15 Hussain and Haque (2016) analysed the relationship between FDI, trade, and economic growth in Bangladesh and discovered a significant relationship between the variables. Das et al (2017) examined the key elements for FDI in Bangladesh. The investigation revealed a positive correlation between FDI inflows, GDP, infrastructure, inflation, trade performance, and labour cost productivity, among other variables.…”

Section: Sjrss Issn: 2733-3698 mentioning

confidence: 99%

The dynamics of Foreign Direct Investment (FDI) inflows in developing economies: Evidence from Bangladesh

Islam¹

2022

Preprint

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Considering the importance of economic development in attracting Foreign Direct Investment (FDI) inflows to the developing economies, this study aims to investigate the relationship between FDI inflows and economic development in Bangladesh using annual time series data for the period of 1991 to 2020. The empirical analysis is performed employing the Autoregressive Distributed Lag (ARDL) bound test method in order to find out the long-run as well as the short-run relationship between FDI inflows and economic development. The empirical evidence from the study indicates that the economic development indicator does not have any statistically significant positive relationship with FDI inflows in the long-run. Other variables, namely the interest rate and export receipts, have a significant statistical relationship with FDI inflows, and the right direction of these two variables in terms of the expected sign of the coefficients shows that to some extent there has been an insightful economic relationship. However, in the short-run, such a relationship between FDI inflows and economic development is statistically justified, where the negative coefficient of the error correction term indicates the dynamic adjustment to the long-run equilibrium has been found to be made in a consistent manner, which is supported by the statistical theory. Finally, this study also suggests that the government should take proper measures to attract higher FDI inflows in order to ensure the faster socio-economic development of the country as a whole.

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“…Various types of research on the factors influencing FDI inflows have been supervised. Das and Das (2020) conducted one such study. They used an econometric model in conjunction with statistical methods such as correlation and regression to analyze 15 years of FDI inflow and other related factors in Bangladesh.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Macroeconomic Factors Defy the Expected Relationship with FDI Inflows in a Developing Country? An Econometric Analysis Based on Bangladesh

Arefin¹,

Roy²,

Mallik³

2021

IJEF

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Through econometric analysis, this study investigates the effects of various economic factors on foreign direct investment (FDI) inflows in Bangladesh from 1980 to 2019. ARDL (Autoregressive Distributed Lag) has been used to estimate the economic determinants of FDI inflows in Bangladesh after removing the trends from the independent variables. Empirical results revealed that GDP, Fixed Telephone Subscribers, Inflation Rate, and Education Spending are the eminent economic determinants of FDI. Subsequently, a Granger causality test and Vector Auto Regression (VAR) confirmed the absence of any long-term impact of these variables on FDI. From the analysis, it is evident that the ADF (Augmented Dickey-Fuller) test is necessary to remove the trend from these variables and corner those variables for the ARDL method to find the significant ones that have substantial impacts on FDI in Bangladesh. GDP, Fixed Telephone Subscribers, Inflation Rate, and Education Spending are found to be statistically significant while all of them having a positive impact on the FDI. Even though this study matches with many other previous studies conducted by researchers, some exciting findings contradict the expected result and open new doors for further research.

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Factors Affecting Foreign Direct Investment Inflows: A Longitudinal Study on Bangladesh

Cited by 3 publications

References 0 publications

Macroeconomic and institutional conditions: the drivers behind divestment of FDI in Sub-Saharan Africa

Macroeconomic and institutional conditions: the drivers behind divestment of FDI in Sub-Saharan Africa

The dynamics of Foreign Direct Investment (FDI) inflows in developing economies: Evidence from Bangladesh

Do Macroeconomic Factors Defy the Expected Relationship with FDI Inflows in a Developing Country? An Econometric Analysis Based on Bangladesh

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