A VAR ANALYSIS ON THE DETERMINANTS OF FDI INFLOWS: THE CASE OF SRI LANKA

Albert WIJEWEERA () and Stuart MOUNTER

Applied Econometrics and International Development, 2008, vol. 8, issue 1, pages 189-198

Abstract: Foreign direct investment in Sri Lanka has grown immensely since the initiation of economic reforms in 1977. Further escalations in FDI inflows are considered an integral component of the current Sri Lankan Government’s intentions to foster economic growth. This paper examines the long-run effects on Sri Lanka’s FDI inflows from changes in key macroeconomic variables of interest. Findings indicate that, of the five variables considered, the wage rate is the most important determinant of inbound FDI to Sri Lanka. However, other major economic indicators such as GDP, exchange rates, interest rates, and the level of external trade should also be given due consideration in policies designed to attract FDI inflows.

Keywords: FDI; Sri Lanka; VAR (search for similar items in EconPapers)
JEL-codes: F21 F14 F13 (search for similar items in EconPapers)
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