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Does the Inflow of FDI Stock Matter? Evidence from SAARC Countries

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  • Hem C. Basnet
  • Gyan Pradhan

Abstract

type="main" xml:id="ecpa12078-abs-0001"> This paper examines the influence of foreign direct investment (FDI) on economic growth in five SAARC member countries – Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Using time series data from 1990 to 2010, an empirical model is estimated in which growth of real GDP depends on FDI, investment, openness, tax policy and inflation. After establishing the stationarity of the data series, cointegration tests are performed, and an error correction model is developed and estimated. The empirical results indicate that, unlike investment and openness to international trade, FDI has not played a significant role in promoting economic growth in these countries. We conclude that the effectiveness of FDI may depend in part on the size of the inflows, as well as the level of economic development.

Suggested Citation

  • Hem C. Basnet & Gyan Pradhan, 2014. "Does the Inflow of FDI Stock Matter? Evidence from SAARC Countries," Economic Papers, The Economic Society of Australia, vol. 33(3), pages 305-312, September.
    • Handle: RePEc:bla:econpa:v:33:y:2014:i:3:p:305-312
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    File URL: http://hdl.handle.net/10.1111/ecpa.2014.33.issue-3
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    Cited by:

    1. Stéphane Mbiankeu Nguea & Issidor Noumba & Armand Gilbert Noula, 2020. "Does Foreign Direct Investment Contribute to Poverty Reduction in Cameroon? An ARDL-Bounds Testing Approach," Working Papers halshs-02570072, HAL.
    2. Fayyaz Ahmad & Muhammad Umar Draz & Lijuan Su & Ilhan Ozturk & Abdul Rauf & Shahid Ali, 2019. "Impact of FDI Inflows on Poverty Reduction in the ASEAN and SAARC Economies," Sustainability, MDPI, vol. 11(9), pages 1-24, May.
    3. Jun, Sangjoon, 2015. "The Nexus between FDI and Growth in the SAARC Member Countries," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 19(1), pages 39-70, March.
    4. Uddin, Moshfique & Chowdhury, Anup & Zafar, Sheeba & Shafique, Sujana & Liu, Jia, 2019. "Institutional determinants of inward FDI: Evidence from Pakistan," International Business Review, Elsevier, vol. 28(2), pages 344-358.

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