ECONOMIC GROWTH, FOREIGN DIRECT INVESTMENT AND TRADE ACCESSIBILITY: EMPIRICAL EVIDENCE FROM SAARC ECONOMIES (1996-2017)
Foreign direct investment (FDi) accounts for the largest share of external capital flows into Asia. From a host country perspective, the FDi is considered to be more attractive and less volatile as compared to other forms of international capital flows i.e. Portfolio investment and remittances. The main motive of this study is to illuminate the importance of inward FDis for SAARC economies and to determine the proportion of these economies that have been assessed and managed to attract FDi over the last two decades. This study seeks to investigate the impact of FDi on Economic growth via trade accessibility through empirical evidence from SAARC economies such as Afghanistan, Bangladesh, Bhutan, india, Nepal, Maldives, Pakistan and Sri Lanka by using Panel data technique. GDP per capita growth will be used as a variable to assess Economic growth in Foreign Direct investment inflows data will be obtained from the website of World Bank, World Development indicators for the selected countries. The data will be a cross-sectional time series from 19962017. FDi is considered as one of the conventional determinants of Economic growth. Economies that are pursuing for a better tomorrow must focus on attracting Foreign Direct investments, although FDi depends on several factors in a country such as market size, level of openness, natural resources, labour cost and productivity, economic growth rate, macroeconomic stability, inflation, technology level and so on. Besides these factors trade accessibility in the recipient economy is also determinants of FDi. This research study argues that openness in trade is one of the important preconditions for FDi inflows to have a positive impact on economic growth. The results indicate that these absorptive capacity factors do not exert their impact on FDi inflows in SAARC economies.
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