Title: Interaction of market size, inflation and trade openness on foreign direct investment inflows in India, China and Japan: panel dynamic analysis

Authors: Md. Hasanur Rahman; Munem Ahmad Chowdhury; Mst Sharmin Akter

Addresses: Department of Economics, Comilla University, Cumilla, Bangladesh ' Department of Economics, Comilla University, Cumilla, Bangladesh ' Department of Economics, Metropolitan University, Sylhet, Bangladesh

Abstract: In the world of competitiveness, FDI is considered as a macroeconomic component, and that developing countries are introducing it as a substitute for their larger investment gaps in policies. Fast-growing countries like China, India, and Japan are also no exception to this. Findings from the study confirm the existence of a long-term relationship among the variables. The long-run dynamic equation shows a greater degree of openness and an expansion of market size attracts more FDI in the long run, whilst raising the inflation rate discourages foreigners from investing. In the short run, none of the variables have any sort of significant relationship with the Granger causality test, giving an interesting insight that unidirectional causalities exist with the remaining variables, which run from FDI to trade openness. In a nutshell, FDI helps to sustain the economies of these countries through its multiplier impact on other macroeconomic factors.

Keywords: foreign direct investment; FDI; inflation; market size; trade openness; India; China; Japan.

DOI: 10.1504/IJICBM.2023.130963

International Journal of Indian Culture and Business Management, 2023 Vol.29 No.1, pp.45 - 64

Received: 10 Sep 2021
Accepted: 10 Nov 2021

Published online: 14 May 2023 *

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