Governance and FDI in Selected SAARC Economies

Abstract

Foreign Direct Investment (FDI) is essential for the developing countries to manage the issues of unemployment, enhance economic growth and reduce poverty. Therefore, developing countries formulate different policies to seek more FDI. Nevertheless, the developing countries have poor governance too. In this context, this study examines the influence of governance and some other controlled variables like control on corruption, financial development and economic growth on FDI inflows to the selected SAARC countries over the 2002-2017 period. For empirical analysis, conventional panel data analysis techniques such as fixed effect and robust least square (RLS) estimators have been employed. The empirical outcomes indicate that improvement in governance is really beneficial for these countries to attract more FDI. This study suggests these SAARC countries to ameliorate the quality of governance as it will be effective to have more FDI and also it will enhance the economic growth.