Foreign direct investment and economic growth : The role of institutional quality - Empirical evidence in Asean countries
Abstract
The economy in ASEAN countries acknowledged foreign direct investment as an significant and potential source. However, the competition in attracting FDI of ASEAN countries is more and more challenging as many competitors appear in the Asia region. Developed countries are usually preferable to invest in countries with stable institutional quality. This research thus aims to examine the economic growth effect of FDI and how the position of institutional efficiency affects the FDI-economic partnership. To answer these questions, panel analysis with three models: Pooled OLS, Fixed Effect Model, and Random Effect Model are employed to run the regression analysis. This thesis examines secondary data in 10 ASEAN countries in the period from 2002 to 2017. The empirical results proposed that (1): FDI has a positive impact on ASEAN economies, (2): The indirect effect on the economic growth of institutional quality through developing FDI-led economic growth. These findings suggest that ASEAN countries should adjust institutions better and more carefully to meet the requirements in order to attract FDI and promote economic growth.