Effects of institutional quality on foreign direct investment inflow in lower-middle income countries
The intention of this study is to look into the effect of institutional quality on Foreign Direct Investment (FDI) inflow in lower-middle income countries. To accomplish this goal, we use a panel data set of 28 lower-middle income countries in six different regions that span the period from 2002 to...
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| Format: | Article |
| Language: | English |
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Elsevier
2022-10-01
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| Series: | Heliyon |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2405844022021168 |
| _version_ | 1811325816335761408 |
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| author | Sadhon Saha Md. Nazmus Sadekin Sanjoy Kumar Saha |
| author_facet | Sadhon Saha Md. Nazmus Sadekin Sanjoy Kumar Saha |
| author_sort | Sadhon Saha |
| collection | DOAJ |
| description | The intention of this study is to look into the effect of institutional quality on Foreign Direct Investment (FDI) inflow in lower-middle income countries. To accomplish this goal, we use a panel data set of 28 lower-middle income countries in six different regions that span the period from 2002 to 2018. This analysis is conducted by using dynamic panel estimation (two-step system GMM). Later, we use threshold analysis to capture how the reaction of institutional quality varies in terms of GDP per capita. The empirical outcomes suggest that control of corruption and regulatory quality enhance FDI inflow while high rule of law and voice and accountability mitigate it in lower-middle income countries. On the contrary, government effectiveness, and political stability do not have any significant impact on FDI. Regulatory quality has the greatest impact on foreign investment inflows of all the metrics. Similarly, threshold analysis reveals that regulatory quality has a positive impact on FDI when per capita GDP of FDI recipient nations exceeds the threshold value of 7.197, while voice and accountability have a positive impact on FDI when per capita GDP exceeds the threshold value of 7.776. In terms of the size of the impact of institutional factors in attracting FDI, lower middle incoutries were quite different from that high and low income countries, though the outcome is largely similar in the three subgroups. According to the regional findings, each of the institutional quality measures is only effective in the East Asia and Pacific region. In addition, threshold analysis reveals how institutions respond to the impact of per capita GDP. |
| first_indexed | 2024-04-13T14:39:21Z |
| format | Article |
| id | doaj.art-0694c2ed42cf4efaa0ec356845be0aaa |
| institution | Directory Open Access Journal |
| issn | 2405-8440 |
| language | English |
| last_indexed | 2024-04-13T14:39:21Z |
| publishDate | 2022-10-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Heliyon |
| spelling | doaj.art-0694c2ed42cf4efaa0ec356845be0aaa2022-12-22T02:42:56ZengElsevierHeliyon2405-84402022-10-01810e10828Effects of institutional quality on foreign direct investment inflow in lower-middle income countriesSadhon Saha0Md. Nazmus Sadekin1Sanjoy Kumar Saha2Department of Economics, Mawlana Bhashani Science and Technology University, Tangail, BangladeshDepartment of Economics, Mawlana Bhashani Science and Technology University, Tangail, BangladeshCorresponding author.;; Department of Economics, Mawlana Bhashani Science and Technology University, Tangail, BangladeshThe intention of this study is to look into the effect of institutional quality on Foreign Direct Investment (FDI) inflow in lower-middle income countries. To accomplish this goal, we use a panel data set of 28 lower-middle income countries in six different regions that span the period from 2002 to 2018. This analysis is conducted by using dynamic panel estimation (two-step system GMM). Later, we use threshold analysis to capture how the reaction of institutional quality varies in terms of GDP per capita. The empirical outcomes suggest that control of corruption and regulatory quality enhance FDI inflow while high rule of law and voice and accountability mitigate it in lower-middle income countries. On the contrary, government effectiveness, and political stability do not have any significant impact on FDI. Regulatory quality has the greatest impact on foreign investment inflows of all the metrics. Similarly, threshold analysis reveals that regulatory quality has a positive impact on FDI when per capita GDP of FDI recipient nations exceeds the threshold value of 7.197, while voice and accountability have a positive impact on FDI when per capita GDP exceeds the threshold value of 7.776. In terms of the size of the impact of institutional factors in attracting FDI, lower middle incoutries were quite different from that high and low income countries, though the outcome is largely similar in the three subgroups. According to the regional findings, each of the institutional quality measures is only effective in the East Asia and Pacific region. In addition, threshold analysis reveals how institutions respond to the impact of per capita GDP.http://www.sciencedirect.com/science/article/pii/S2405844022021168Good governanceFDIGMMInstitutional qualityLower-middle income countries |
| spellingShingle | Sadhon Saha Md. Nazmus Sadekin Sanjoy Kumar Saha Effects of institutional quality on foreign direct investment inflow in lower-middle income countries Heliyon Good governance FDI GMM Institutional quality Lower-middle income countries |
| title | Effects of institutional quality on foreign direct investment inflow in lower-middle income countries |
| title_full | Effects of institutional quality on foreign direct investment inflow in lower-middle income countries |
| title_fullStr | Effects of institutional quality on foreign direct investment inflow in lower-middle income countries |
| title_full_unstemmed | Effects of institutional quality on foreign direct investment inflow in lower-middle income countries |
| title_short | Effects of institutional quality on foreign direct investment inflow in lower-middle income countries |
| title_sort | effects of institutional quality on foreign direct investment inflow in lower middle income countries |
| topic | Good governance FDI GMM Institutional quality Lower-middle income countries |
| url | http://www.sciencedirect.com/science/article/pii/S2405844022021168 |
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