Trade Openness and FDI Inflows: A Comparative Study of Asian Countries

Abstract

This study presents the new regression estimates of relationship among openness of trade and Foreign Direct Investment inflows for India, Iran and Pakistan over the period 1982-2012. Fixed effect and Pooled OLS techniques are used to analyze the panel data for measuring individual country effects, group effects and time effects while exploring the relationship among openness of trade and FDI inflows. Results showed that higher openness of trade have significant positive impact on FDI inflows. The results also investigated that FDI inflows seem to be affected significantly by conventional determinants like as Exchange rate, Inflation (consumer price index) and GDP per capita etc. Based on results the author has concluded that increase in trade openness would be a better option for more and sustained FDI inflows for the long run and also improving the welfare of the people.