Abstract
The paper focuses on various factors that affect the inflow of Foreign Direct Investment in developing countries. The study majorly deals with Asian countries, namely India, China, Myanmar, Nepal, Pakistan, Bangladesh and Bhutan, that are progressing from being aid-dependent to trading giants. The factors affecting FDI are majorly categorised into dependent and independent variables. Here, in this study, the dependent variable considered is FDI inflow, and independent variables are market size, the value of the currency, export, import, gross fixed capital formation, GDP deflator, cost of borrowing and economic reforms. Pooled Ordinary Least Square (OLS), fixed effect and random effect regression analysis is done to ascertain the best regression model and various tests are performed to check the intensity of effect caused by each independent variable on our dependent variable.
Highlights
World Bank has succinctly defined FDI as “the “Among developing economies, the Asia- Pacific net inflows of investment to ac- region received the largest share of global FDI quire a lasting management interest in an enter- inflows attracting 45 per cent in 2018
United Nations Conference on Trade and De- To study the impact of reforms on FDI inflow velopment (UNCTAD) said, “South Asia recorded
We studied various variables to ascertain how changes in independent variables affect dependent variables
Summary
United Nations Conference on Trade and De- To study the impact of reforms on FDI inflow velopment (UNCTAD) said, “South Asia recorded. Agarwal, Gupta, and Mishra (2012) analysed Bangladesh, Pakistan, India, Sri Lanka, Nepal and Maldives with parameters GDP, direct investment, trade openness, real effective exchange rate and labour is taken into consideration for years 1990–2010. Parashar (2015) investigated factors affecting FDI inflow in China and India over a stretch of 30 years from 1980–2013 using data on market size, infrastructure, trade openness, growth rate, policy changes, inflation and opportunity cost to investors collected from UNCTAD, World Bank, IMF, ILO database and Federal Reserve. The study concluded that macroeconomic indicators significantly affected FDI inflows in China, Hong Kong, Indonesia, Jordan, Pakistan, the Philippines, and Vietnam and revealed that trade openness and exchange rate are decisive economic indicators to attract FDI towards the economies.
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