Do environmental and institutional quality attribute to inflows of FDI in Lower-Middle income Nations? Evidences from asymmetric investigation

Abstract

The present study investigates the correlation between environmental and institutional quality and their influence on the inflow of foreign direct investment (FDI) in lower-middle income countries. Employing an asymmetric investigation approach, the study endeavors to furnish all-encompassing insights into the determinants of Foreign Direct Investment (FDI) and their diverse effects across disparate nations. Based on empirical analysis and econometric modeling, it has been determined that FDI inflows are significantly impacted by both environmental and institutional quality. Countries that exhibit superior environmental quality, characterized by effective pollution control measures and sustainable resource management, tend to attract greater levels of foreign direct investment (FDI). Likewise, robust institutional quality, distinguished by sound governance, transparent regulations, effective legal systems, and diminished corruption, has a favorable impact on the inflow of foreign direct investment (FDI). Additionally, the study reveals asymmetric effects, indicating that the correlation between FDI inflows and environmental and institutional quality varies among countries depending on their individual circumstances. The aforementioned findings emphasize the significance of tackling environmental and institutional elements in order to draw in foreign direct investment and encourage sustainable economic development. The study's conclusion suggests implementing policies to enhance environmental quality, fortify institutional frameworks, and customize strategies according to country-specific contexts to augment FDI inflows in lower-middle income nations. By implementing these measures, policymakers can establish an appealing investment environment, leverage environmental benefits, and promote sustainable development.