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Institutions, macroeconomic policy and foreign direct investment: South Asian countries case

  • Azam, Muhammad
  • Khan, Hashim
  • Hunjra, Ahmed Imran
  • Ahmad, H. Mushtaq
  • Chani, Muhammad Irfan

Recent economic literature suggests that institutional quality factors exerted positive effect on foreign direct investment (FDI) inflows. The main focus of this study is to examine the role of institutional factors and macro economic policy factors on FDI inflows in a panel data of seven South Asian countries over the period of 12 years since 1996-2007. This study implies that a good institutional quality plays a key role in attractiveness of FDI inflows. A poor macroeconomic policy situation produces negative impact on FDI. Good Institutional quality and macroeconomic policy generate negative in a combined form on FDI. This study further implies that poor economic policy deteriorates institutional quality and creates negative effect on FDI inflows. Incredibility in trade liberalization policy may be a part of poor macro economic policy.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32480.

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Date of creation: 01 Jan 2011
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Handle: RePEc:pra:mprapa:32480
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