Evaluating the Impact of the Key Factors on Foreign Direct Investment: A Study Based on Bangladesh Economy.

Author(s)

Abu Bakar Seddeke , Mahbubur Rahman ,

Download Full PDF Pages: 01-6 | Views: 379 | Downloads: 108 | DOI: 10.5281/zenodo.3466428

Volume 5 - December 2016 (12)

Abstract

—Foreign Direct Investment is considered as one of the engines of initiating economic growth in recent times. It is also widely believed that foreign investment benefits the host economy in a number of ways. This study evaluated the impact of the key factors on FDI from Bangladesh point of view as the Bangladeshi government has initiated several incentive packages for foreign investors to achieve its vision 2020. However, this study has used econometrics techniques in order to run multiple regressions on time series data. This study has performed analyses by using correlation matrix, stationary test, and multiple regression analysis. Correlation matrix has been used to test for multicollinearity, and the stationary test has been performed by using Augmented Dickey-Fuller (ADF) statistic. Data on key determinants and FDI have been collected for the time period between 2000 and 2015.The results of this study indicated that trade openness and exchange rates are found to be the key determinants of FDI inflows in Bangladesh. On the contrary, GDP, interest rate, and inflation are found to be insignificant in attracting FDI inflows in Bangladesh even though GDP and inflation have got their expected signs. This study recommends that the government of Bangladesh should focus on ways to increase transparency, ways to reduce corruption, mobilization of domestic resources, control inflation rate, stabilise exchange rates, and keep interest rates at a tolerable level so that more foreign investment could be attracted. 

Keywords

Bangladesh Economy, Exchange Rate, Foreign Direct Investment, Gross Domestic Product, Inflation, Interest Rate, Trade Openness.

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