DOMESTIC INVESTMENT CLIMATE AND FOREIGN DIRECT INVESTMENT IN SOUTH ASIA: A PANEL DATA EVIDENCE

Assad Ullah, Yang Qingxiang (), Mohammad Abdul Kamal () and Zahid Ali4 ()
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Zahid Ali4: Zhongnan university of Economics and Law, Wuhan China

IBT Journal of Business Studies (JBS), 2015, vol. 11, issue 2, 149-164

Abstract: Purpose Developing countries have welcomed foreign direct investment FDI, since they realized its manifold advantages i.e.capital provision, technological and skills transfer, etc.In the extant literature numerous economic and institutional factors have been identified as potential determinants of FDI, however, domestic investment climate, being a major determinant, has escaped literature on account of unavailability of its reliable data.In this study an endeavor has been made to fill the gap by using index of economic freedom as proxy for domestic investment climate.Methodology/Sample The study focuses on four South Asian economies India, Pakistan, Bangladesh & Srilanka for the period 19952013, employing panel data regression with random effect.Findings Results indicate the presence of significant positive relationship between economic freedom and foreign direct investment inflows.The study concludes that economic freedom is a robust and significant determinant of FDI in these South Asian countries.Practical Implications Policy makers will have to take measures which can improve the level of economic freedom for attracting more FDI to the region.Thus a plan of action is required to create more friendly investment and corruption free environment with high level of trade openness, and to craft efficient monetary and fiscal policies.

Keywords: Domestic Investment Climate; Foreign Direct Investment; South Asia (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:aib:ibtjbs:v:11:y:2015:i:2:p:149-164

DOI: 10.46745/ilma.ibtjbs.2015.112.12

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