Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach.

ABSTRACT: We tested the causality between FDI and its determinants in Bangladesh in the presence of structural break harnessing Vector Autoregression (VAR) model and Granger causality test. Regressors such as GDP growth rate, inflation, interest, corporate tax, exchange and wage rate, and trade openness (TO) have been used. VAR model finds that interest, tax, wage, and exchange rate do not affect inward FDI. However, the inflation rate and TO significantly impact the inward FDI in Bangladesh. The Granger causality test reveals a bidirectional causality in the FDI-inflation and FDI-TO nexus, whereas other explanatory variables do not cause the FDI granger. Variance decomposition (VDC) and impulse response function (IRF) assessment approve strong, moderate, and poor or no explanatory power of TO, infl

SUBMITTER: Morshed N 

PROVIDER: S-EPMC9191542 | biostudies-literature | 2022

REPOSITORIES: biostudies-literature