Comparative Study on the Influence of FDI on Economic Growth in Bangladesh and Its Neighboring Countries

Abstract

Due to globalization, there has been a significant amount of growth in foreign direct investment, exports, imports and remittances which exaggerate the interaction between states, regions and firms. It became obvious for the developing countries like Sri Lanka, Pakistan, India and Bangladesh to take the advantage and stimulate their economic growth through trade and investment. Literature shows that the relationship among these macroeconomic variables is ambiguous as some of the macroeconomic variables have positive impact on growth and others have negative impact, and vice-versa. Keeping this in mind, this paper examines what influence that foreign direct investment, export, gross capital formation, labor force participation and remittances have on economic growth based on a time series data to realize the meticulous scenario. Both descriptive and inferential statistics were implied here where RGDP was response variable and the rest five were explanatory variables. Ordinary Least Square method of multiple linear regression and correlation were carried out and the results disclose that gross capital formation and remittance have significant positive influence, export has significant negative impact on RGDP for most of the countries, and foreign direct investment has significant positive influence only in Pakistan. It will be worthy to say that foreign direct investment, exports and remittances have roles to play for a country’s development as long as they become greater in terms of volume and their ratio to GDP.