BANGLADESH INSTITUTE OF INTERNATIONAL AND STRATEGIC STUDIES

IS FOREIGN DIRECT INVESTMENT GROWTH-ENHANCING IN BANGLADESH?

Author: Mahfuz Kabir

DOI Link: https://www.doi.org/10.56888/ BIISSj2007v28n2a1

ABSTRACT

The recent debate over the foreign direct investment (FDI)-economic growth nexus has generated sizeable theoretical and empirical investigation both for developed and developing countries. This study explores the nexus in the context of a South Asian less developed country, Bangladesh, using long run time series data from 1972 to 2005. The study finds that FDI can explain the variation in GDP, but the relationship between FDI and growth is Granger-neutral, i.e., FDI does not cause economic growth. Various time series tests have been performed on the dataset, which show that the series FDI is stationary or random but GDP is not, and the variables are not cointegrated, which means there is no long-term relationship between the two variables.