Abstract:
This study attempts to investigate the determinants of foreign direct
investment and the influence of inward foreign direct investment over
economic growth in South Asian region. Having identified the gap of
analysis of previous literature in this regard, this study was carried out
using panel data for the period 1980-2010, adopting panel least square
method. Results of the study indicated that there is a significant positive
influence of foreign direct investment over economic growth in the South
Asian region. The gross domestic product, size of the government,
population, gross domestic capital formation and human capital played a
momentous role in determining foreign direct investment. To investigate
the causality between foreign direct investment and economic growth,
Pair-wise Granger Causality tests were employed that suggested the
causality is bidirectional at 5% level of significance and uni-directional at
1% level of significance. Further, Pedroni Residual based Cointegration
Test confirmed the existence of a long term influence of foreign direct
investment over economic growth.
