Impact of Selected Determinants on Foreign Direct Investment (FDI) in Bangladesh: An Empirical Study Based on Panel Data

Abstract

This study analyzes the impact of some selective macroeconomic factors on FDI as it plays a vital role in any country’s economy. In this study, based on previous literature, we have selected GDP, inflation rate, interest rate and corporate income tax as determinants. We investigate empirically the impact of those macroeconomic variables on FDI. Panel data has been collected from three global and local sources for analysis. Total 29 observations from 1987 to 2015 for each variable have been analyzed to show the effect of the independent variables using regression model. Overall, the model was found to have significant predictability over FDI. The empirical result also revealed significant impact of GDP and corporate income tax on FDI individually, while inflation and interest rate were found statistically insignificant. The descriptive statistics and correlation coefficients matrix also observed to investigate the relationship among the dependent and selective independent variables. FDI helps to upgrade the socioeconomic condition of the country and hence, to compete in a competitive world, investment friendly policy adoption, enhanced infrastructure and improvement of overall investment climate are essential for Bangladesh to ensure the growth of FDI journey and ultimately foster the economic development journey.