Impact of Macroeconomic Variables on Foreign Direct Investment of Bangladesh

Mohammad Sogir Hossain Khandoker, Md. Shakil Mallik and Rafiqul Bhuyan

Bulletin of Applied Economics, 2025, vol. 12, issue 1, 1-19

Abstract: The main purpose of the study is to explore the impact of macroeconomic variables, such as GDP growth rate (GDPGR), inflation rate (INF), the real exchange rate (RER), and balance of trade (BOT) on foreign direct investment the FDI in Bangladesh. Data has been gathered from the World Bank's data indicators for the years 1987-2022. Our result shows that there is a significant and positive correlation between the macro variables and FDI. Additionally, the macro variables are co-integrated and have both short-run and long-run relations with FDI. We also observe that there are unidirectional relations of GDP growth and real exchange rate with foreign direct investment. On the contrary, there is a non-directional causality between the balance of trade and FDI along with inflation and FDI. Thus, for attracting foreign investors, the government of Bangladesh and economic policymakers should focus on and critically analyze macroeconomic aspects that highly influence the FDI in Bangladesh.

Keywords: Foreign Direct Investment (FDI); Gross Domestic Product Growth Rate (GDPGR); Balance of Trade (BOT); Real Exchange Rate (RER); Inflation Rate (INF). (search for similar items in EconPapers)
JEL-codes: F32 G18 (search for similar items in EconPapers)
Date: 2025
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