Economic governance, foreign direct investment and economic growth in South and East Asia pacific region: evidence from systematic literature reviews and meta-analysis

Good economic governance is considered to be one of the key drivers of both inward FDI and economic growth. In spite of this wide belief, empirical estimates focusing on South and East Asia Pacific countries are less than conclusive. The aim of this thesis is to summarise the empirical findings of existing studies on the effect of governance on FDI, FDI on growth and governance on growth for South and East Asia & Pacific regions using systematic literature review and meta-regression analysis. Findings of first meta-regression analysis based on 771 estimates from 48 empirical studies suggest that, except for corruption all measures of governance have an important effect on FDI. While on one hand political stability, government effectiveness and regulation are positively related to FDI, on the other hand rule of law is negatively related to FDI. As expected, aggregate governance has positive effect FDI. Results of second meta-regression analysis applied to 633 estimates from 37 empirical studies indicate that FDI shows growth enhancing effect in the region as a whole. While FDI showed growth enhancing effects in the case of all estimates, estimates controlling for endogeneity and South East Asia, I did not have sufficient observations in the case of South Asia and East Asia to reach firm conclusions. The findings of third meta-regression analysis using 554 estimates from 29 studies suggest that except for corruption, other measures of governance such as law and aggregate governance have positive effect on growth. Surprisingly, in case of voice and accountability, research literature has failed to provide evidence of genuine effect of it on growth. In addition to the above, this thesis highlights that effect size and statistical significance of the reported estimates depends on study, real world, author and journal related aspects. The results of these three studies have important policy implications