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Does institutional quality matter in attracting foreign direct investment? the case of Ethiopia based on ARDL approach

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  • Samad, Abdul
  • Masih, Mansur

Abstract

This study investigates the role of institutional quality as a determinant of foreign direct investment (FDI) in the case of Ethiopia by applying the autoregressive distributed lag (ARDL) cointegration technique developed by Pesaran and Pesaran (1997). The results of the study demonstrate that institutional quality exerts a long run impact in determining the FDI inflows. The findings suggest that institutional quality is an important determinant of FDI in Ethiopia. The findings also suggest that the combined impact of institutional quality and trade openness is also significant by positively contributing to attracting FDI not only in the short run by in the long run as well. The findings support the policy implication that simultaneous implementation policies that reduce trade barriers and improve institutional quality play an important role in attracting FDI to a developing country like Ethiopia.

Suggested Citation

  • Samad, Abdul & Masih, Mansur, 2018. "Does institutional quality matter in attracting foreign direct investment? the case of Ethiopia based on ARDL approach," MPRA Paper 108493, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:108493
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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