Paper title: Macroeconomic Determinants of FDI Inflow in Bangladesh: Univariate and Multivariate Time Series Econometrics
Abstract: Foreign Direct Investment (FDI) inflows in Bangladesh have exhibited a declining trend in recent years despite the steady expansion of the national economy. This study employs both univariate and multivariate time series econometric techniques, including ARIMA, ARDL, and ECM models, to analyze the macroeconomic determinants of FDI inflows from 1972 to 2020. The results indicate that exchange rate, GDP growth, trade openness, stock market capitalization, and inflation significantly influence FDI inflows, while the impact of foreign exchange reserves and interest rates varies across the short and long run. The estimated models demonstrate robust predictive capabilities, with the ARIMA (1,1,0) model providing reliable forecasts for FDI trends. Additionally, the ARDL bounds test confirms a long-run equilibrium relationship, with the error correction term suggesting a rapid speed of adjustment of 92.43%. Policy implications derived from these findings underscore the need for maintaining exchange rate stability, enhancing trade openness, and strengthening financial markets to attract sustained FDI. Additionally, fostering macroeconomic stability through inflation control and prudent interest rate policies can improve investor confidence. The results advocate for targeted policy interventions, including investment-friendly regulations and infrastructure development, to position Bangladesh as a more attractive destination for foreign investment. This research contributes to the broader literature by offering empirical insights into the dynamic relationship between macroeconomic variables and FDI inflows, aiding policymakers in crafting data-driven strategies for long-term economic growth. Keywords: Foreign Direct Investment, ARDL, ARIMA, ECM, Exchange Rate, Trade Openness, Macroeconomic Stability. DOI: https://www.doi.org/10.61607/JFB.V21N1-2.A7 Article Info: Submission Date: November 23, 2023; Acceptance Date: June 20, 2024.
