Do Good Institutions and Economic Uncertainty Matter to Foreign Direct Investment?

Ramesh Bommadevara () and Akshay Sakharkar ()

Asian Economic and Financial Review, 2021, vol. 11, issue 6, 471-487

Abstract: This study investigates the effects of institutional quality, economic policy uncertainty and other key fundamental factors on foreign direct investment (FDI) inflows for a sample of 22 economies from 2000 to 2019. First, the quality of institutional infrastructure in the host country matter greatly to FDI inflows. Second, a subservient increase in the Economic Policy Uncertainty (EPU) growth rates adversely affects FDI inflows. Additionally, we found that macroeconomic fundamentals pertaining to the level of financial openness, exchange rate stability and financial development in the host country are of great importance to FDI inflows. In essence, the findings from our study suggest that the improvement of macroeconomic fundamentals in conjunction with robust and strong institutional infrastructure can contribute to the moderation of economic policy uncertainty, which deters FDI inflows.

Keywords: FDI inflows; Institutional quality; Domestic economic policy; uncertainty; Sequential (two-stage) estimation. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.aessweb.com/index.php/5002/article/view/2100/3348 (application/pdf)
https://archive.aessweb.com/index.php/5002/article/view/2100/7395 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:asi:aeafrj:v:11:y:2021:i:6:p:471-487:id:2100

Access Statistics for this article

More articles in Asian Economic and Financial Review from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().