Impact of foreign direct investment and trade openness on economic growth of Bangladesh: an empirical analysis

Abstract

This paper assesses the relationship between FDI, international trade and economic growth of Bangladesh in the presence of macroeconomic instability, by empirically analyzing available data over the time period of 1980 - 2018. Results from Augmented Dickey-Fuller test, OLS regression, Johansen test of co-integration and Vector Error-Correction Model suggest that there is positive relationship between FDI, trade openness and GDP, and that there exists a long-run association between FDI and per capita GDP. Therefore, the government should take appropriate policy measures to attract foreign investors to generate more employment opportunities within the economy and contribute to the reduction of poverty. However, the policies must be framed keeping in mind the political instabilities faced by Bangladesh.