The impact of foreign direct investment inflows on economic growth: Evidence from Bangladesh

Abstract

The research finds out that there is a causal relationship between Foreign Direct Investment Inflows (FDI) and Gross Domestic Product (GDP) Growth. The study also reveals that the issue of Foreign Direct Investment (FDI) Inflows has become a vital weapon of Gross Domestic Product (GDP) growth for Bangladesh, bringing in technological development, capital investment and knowledge also needed for economic growth. According to this view, this paper purposes to study the relationship between FDI and economic growth in Bangladesh by the co-integration and Vector Error Correction Metrics (VECM) Test. The empirical analysis has conducted by using annual secondary data for the year of 1990-2015 of Bangladesh, to investigate the relationship between FDI Inflows and Economic Growth in Bangladesh. Paper finds out the positive relationship running from FDI Inflows to GDP in the long-run and short-run. The study suggests that Bangladesh government can create foreign investment-friendly policies, transfer of knowledge and trade promotion as well. This paper also advocates that the country's capacity to improve on economic growth will subject to promote more FDI Inflows.