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Relationship between Economic Freedom and Foreign Direct Investment: Panel Cointegration Analysis

Author

Listed:
  • Sofuoglu, Emrah

    (Ahi Evran University)

  • Kizilkaya, Oktay

    (Ahi Evran University)

  • Uysal, Dogan

    (Celal Bayar University)

Abstract

Economic freedoms have recently become one of the most important institutional indicators that attracted the attention of researchers. The level of economic freedom of a country is thought to be an important factor in attracting investments. This study aims to examine the relationship between economic freedom and foreign direct investment. In this context, countries need to establish efficient policies for economic freedoms to increase foreign direct investments. To this extent, most attractive foreign direct investment countries (The U.S, Hong Kong, China, Ireland, Netherlands, Switzerland, Singapore, Brazil, Canada and India) are investigated in the study. The study covers the period 1995-2015 and Pedroni cointegration test, panel FMOLS and panel DOLS methods are utilised to determine the relationship between the variables. According to analysis findings, there is a long-term relationship between economic freedom and foreign direct investment. In addition, both panel FMOLS and DOLS results indicate that economic freedom has a positive impact on foreign direct investment in the long term. These findings are evaluated and some policy recommendations are suggested in the conclusion part.

Suggested Citation

  • Sofuoglu, Emrah & Kizilkaya, Oktay & Uysal, Dogan, 2019. "Relationship between Economic Freedom and Foreign Direct Investment: Panel Cointegration Analysis," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 10(2), pages 341-355, April.
    • Handle: RePEc:ris:buecrj:0394
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    Citations

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    Cited by:

    1. Emel SIKLAR & Ilyas SIKLAR, 2022. "Does Foreign Direct Investment Affect Macroeconomic Dynamics? An S-VAR Approach for Turkey," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 8(3), pages 85-103, 09-2022.

    More about this item

    Keywords

    Economic Freedom; FDI; FMOLS; DOLS; Panel Data Analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other

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