Factors Affecting Foreign Direct Investment In South Asian Countries

Abstract

Foreign Direct Investment (FDI) plays a crucial role in the economic development of South Asian countries, contributing to their growth, employment generation, and overall stability. This study investigates the influence of FDI on south Asian countries. Secondary data of was collected World Asian Development Bank, World Development Indicator and Federal Bureau of Statistics. Fixed Effects Model has been recommended by the Chow and Hausman tests for the regression analysis in this study. The finding of the study revealed that GDP, Lending interest Rate, Trade openness, and political stability has a positive and inflation rate has a negative significant explanatory factor at 1%, 5 %, and 10% level that attract Foreign Investment in the emerging Asian economies. Based on the findings, the state should stabilize the exchange rate and adopt liberal policy to increase bilateral trade across the border. Furthermore political stability must be maintain to encourage the foreigner investor for investment in the Asia.

Keywords: FDI, South Asian Countries, Pooled data, Fixed Effect Model, GDP