The impact of trade openness on FDI inflows in Asian emerging economies

Rathnayaka Mudiyanselage Malsha Mayoshi () and Epuran Gheorghe
Additional contact information
Rathnayaka Mudiyanselage Malsha Mayoshi: Transilvania University of Brasov, Brasov, Romania
Epuran Gheorghe: Transilvania University of Brasov, Brasov, Romania

Proceedings of the International Conference on Business Excellence, 2022, vol. 16, issue 1, 228-238

Abstract: In many countries, foreign direct investment is becoming one of the most significant components of economic development. The Asian emerging market is regarded as one of the best places to invest. Many governments have taken steps to deal with international trade to attract more foreign direct investment and open up their economies by implementing several progressive policies and creating a free trade zone. The main objective is to examine the impact of trade openness on foreign direct investment inflows in Asian emerging economies by employing the Panel-Pooled Mean Group Autoregressive Distributed Lag (PMGARDL) model and examining the direction of the causality between trade openness and FDI inflows using the Granger causality test period from 1996 to 2019. To examine the impact of trade openness on FDI inflows, we employed potential determinants of FDI such as GDP, population size, inflation, mobile telephone subscriptions, gross fixed capital formation, and total reserve as control variables in the model. As a result, trade openness has a positive and statistically significant impact on FDI inflows in the long run, but there is no significant relationship between trade openness and FDI inflows in the short run. The Granger causality test indicated that Asian emerging countries have a unidirectional causal relationship and that the causality runs from trade openness to foreign direct investment. In line with the findings, it is better to promote strong open trade policies to improve the investment climate in each country to attract more FDI into the region.

Keywords: FDI; Trade openness; Asian emerging economies; PMG/ARDL model; Granger causality test (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/picbe-2022-0022 (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:vrs:poicbe:v:16:y:2022:i:1:p:228-238:n:18

DOI: 10.2478/picbe-2022-0022

Access Statistics for this article

Proceedings of the International Conference on Business Excellence is currently edited by Alina Mihaela Dima

More articles in Proceedings of the International Conference on Business Excellence from Sciendo
Bibliographic data for series maintained by Peter Golla ().