Abstract
This study is conducted to examine the effect of Foreign Direct Investment
(FDI) on industrial development in Asian countries. A sample of six Asian
countries including Bangladesh, China, India, Malaysia, Sri Lanka and Pakistan
has been taken from a period of 1991 to 2013 and panel data model has been
used. Panel diagnostic tests such as Chow test, Hausman specification test and
Breusch-Pagan test have been used to decide which panel model is to be used.
These tests suggest Pooled OLS model as it got higher votes. In this research,
the impact of four explanatory variables including Foreign Direct Investment
(FDI), Trade openness, interest rate and infrastructure are measured on
Industrial development using Pooled OLS model. The findings of the study
suggest that FDI has significant positive relation with industrial development
which shows that FDI is a very crucial element for the industrial development of
any country. Whereas trade openness has insignificant relation with industrial
development. Interest rate has significant negative association with industrial
development which states that if the government increases interest rate, it will
discourage the investors to make investment. Infrastructure have significant
negative relation with industrial development. In case of infrastructure, the
negative sign shows that despite of poor infrastructure facilities, foreign
investors make investment in these countries which is a good sign. The findings
of current study are similar with the Neo-Classical Theory of Growth. The
results of current study show that foreign direct investment is beneficial for
industrial development as it has a positive relation.
Usman Ali, Shahzad Anwar, Muhammad Asif Hayat. (2018) Impact of Foreign Direct Investment on The Industrial Development: Evidence from Asian Countries, Abasyn Journal of Social Sciences, Volume-11, Issue-1.
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