Title: Determinants of FDI in South Asia: does corruption matter?

Authors: Kirti Gupta; Shahid Ahmed

Addresses: Department of Economics, Jamia Milia Islamia, Jamia Nagar, 110025, New Delhi, India ' Department of Economics, Jamia Milia Islamia, Jamia Nagar, 110025, New Delhi, India

Abstract: The present study is an attempt to investigate the impact of corruption on foreign direct investment (FDI) inflows in the South Asian region. It aims to find out whether the perceived levels of corruption impede or stimulate FDI inflows. This is done through an analysis of panel data on various factors of FDI for five South Asian economies-Bangladesh, Nepal, India, Pakistan and Sri Lanka ranging from 1998 to 2015. The study uses panel data estimation methodologies in order to draw inferences. The results of our analysis show that an increase in levels of corruption neither induce FDI nor does it impede corruption, indicating that corruption does not matter in the determination of FDI flows. The enlarging size of the economy stands out as the major factor determining FDI flows that buttresses the theory of market seeking FDI.

Keywords: corruption; foreign direct investment; FDI; South Asia; panel data.

DOI: 10.1504/IJEBR.2018.094009

International Journal of Economics and Business Research, 2018 Vol.16 No.2, pp.137 - 161

Received: 09 Jan 2017
Accepted: 30 May 2017
Published online: 13 Aug 2018 *

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