Determinants Of Foreign Direct Investments In The South Asian Association For Regional Cooperation

Abstract

This paper aims to investigate the relationship between Foreign Direct Investment (FDI) inflows and their determinants in six major countries in the South Asian Association for Regional Cooperation (SAARC) over the period 1998 to 2010. Using panel data techniques, we account for the possible presence of both economic dependencies and structural breaks. The findings show that there are common variables of economic significance among the examined countries. Macro determinants, such as openness, growth rate, exchange rate, and economic instability, have a long-run impact on FDI inflows in the panel. The results are submitted to a battery of tests, including panel unit root and panel co-integration tests.