Determinants of Foreign Direct Investment in Bangladesh and Empirical Analysis

This study examines the various economic factors effects on foreign direct investment (FDI) inflows into Bangladesh during the study period ranging from 1972 to 2010. Log linear regression model has been used and the method of least squares (OLS) has been applied to estimate the various determinants effects on FDI inflows. In the models, dependent variable is Natural Log of real foreign direct investment. Independent variables are market size proxied by natural log of real GDP, Trade Balance, Labor productivity expressed by natural log of productivity indices of industrial labor in selected industries (Jute, Cotton, Paper, Steel, Cement, and Fertilizer). According to the econometric results, market size has positive sign and is statistically significant. Trade balance is found positive sign and statistically significant. Labor productivity has positive sign but not significant. Keywords: Foreign Direct Investment, Determinants of FDI, Unit Root Test, Co-integration test, Jarque-Bera test, multicollinearity test, Heteroskedasticit