IMPACT OF FDI REGULATORY POLICIES ON FDI INFLOWS IN DEVELOPING COUNTRIES
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Date
2023-02-27
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Publisher
UMT, Lahore
Abstract
Foreign direct investment (FDI) inflow is considered the lifeline of the developing
countries because it enhances the employment opportunities which increase the
economic activities. The present study deals with FDI regulatory policies which
influence the FDI inflows in developing countries. This study has tried to achieve the
two objectives as to examine the FDI regulatory restrictiveness index (RRI) on FDI
inflows and ease of doing business (EDB) on FDI inflows in the developing countries.
To achieve these objectives, the panel data of 39 developing countries from 1997 to
2020 is used by using the FGLS econometric approach. The empirical results found that
RRI proposes the U-shaped relationship to determine the FDI inflows. The linear affect
found that all developing countries lie on the left side of the U-shaped curve which
shows the inverse relationship between RRI and FDI inflows. Furthermore, this study
also explores that EDB also propose U-shaped relationship to determine the FDI
inflows. The linear affect shows that Azerbaijan, Brazil, Croatia, Kyrgyzstan, Lebanon,
Malaysia, Montenegro, Peru, Romania, Russia, Saudi Arabia, South Africa, and
Thailand lie on the right side of the U-shaped curve which shows that EDB increases
FDI inflows. This study recommends that developing should decline the FDI restriction
and increase the opportunities of ease of doing businesses.