The dance of politics and international finance: exploring determinants of foreign direct investment
by Faheem Gul Gilal; Amjad Ali Memon; Asad Ali Memon; Naeem Gul Gilal
International Journal of Technology, Policy and Management (IJTPM), Vol. 21, No. 3, 2021

Abstract: The main purpose of this study is to empirically investigate the structural relationship between macroeconomic indicators (e.g., political stability, economic uncertainty, and financial inclusion) on foreign direct investment (FDI), and to explore which macroeconomic indicator is more capable of increasing FDI. To this end, the panel data of the aforementioned variables were obtained from two most rapidly developing countries (e.g., China and Russia) and from one highly developed country (e.g., UK) for the period from 2004 to 2018. Data diagnostic and auto-regressive distributed lag (ARDL) model was used as a method to test hypothesised relationships among variables. Our results establish that the more politically and economically stable countries receive greater FDI than the less stable countries. Findings further suggest that economic uncertainty and financial inclusion negatively affect FDI. Finally, we discuss the implication for policy in a great detail.

Online publication date: Fri, 24-Sep-2021

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