Do Corruption and Trade Openness Impede FDI?

Abstract

Foreign direct investment (FDI) has been given much attention
in the recent past just because of its contribution to economic
development. However, there are several socio-economic
factors that impede FDI. Therefore, the objective of current
study is to probe whether corruption and trade openness affect
FDI. The study uses data from 1990-2015 for SAARC countries
and employs panel ARDL model to retrieve short- and long-run
results. The findings reveal that corruption plunges the FDI in
long-run, while trade openness increases FDI. On the contrary,
we report heterogeneous results in short-run. Additionally, we
deduce a few policy implications based on the findings of this
study.