Nexus between environmental qualities, institutional quality and FDI inflows in Lower-income Countries
School of Business and Economics, United International University, Dhaka-121, Bangladesh.
Research Article
World Journal of Advanced Research and Reviews, 2023, 18(03), 321–345
Article DOI: 10.30574/wjarr.2023.18.3.1045
Publication history:
Received on 23 April 2023; revised on 05 June 2023; accepted on 07 June 2023
Abstract:
The study "Nexus between Environmental Qualities, Institutional Quality, and FDI Inflows in Lower-income Countries" explores the correlations among environmental qualities, institutional quality, and foreign direct investment (FDI) inflows in lower-income countries. By examining these factors, the study endeavors to augment our comprehension of foreign direct investment (FDI) determinants and offer valuable perspectives for policymakers and investors in cultivating a favorable investment climate. Through empirical analysis and econometric modeling, the study reveals a positive correlation between favorable environmental characteristics and FDI inflows. Countries with superior pollution management, sustainable resource practices, and environmental regulations tend to attract greater foreign direct investment (FDI). Furthermore, the study underscores the pivotal importance of institutional quality in attracting foreign direct investment (FDI), underscoring the significance of robust governance, transparent regulatory frameworks, effective legal systems, and reduced corruption levels. Furthermore, the study indicates the presence of an interaction effect between environmental qualities and institutional quality. This implies that nations possessing high institutional quality are more capable of utilizing their environmental advantages to entice foreign direct investment. The findings above emphasize the significance of implementing sustainable development practices, exhibiting responsible business conduct, and fostering a favorable investment climate as crucial factors in enticing foreign investors. The study provides policy recommendations encompass enhancing environmental qualities, reinforcing institutional quality, promoting sustainable development, encouraging public-private partnerships, improving data availability and transparency, and fostering capacity building and knowledge transfer. Incorporating these suggestions may aid in augmenting foreign direct investment inflows, stimulating economic expansion, and fostering sustainable development in less affluent nations.
Keywords:
Environmental quality; institutional Quality, FDI; Trade Openness; ARDL; CS-ARDL; NARDL; Asymmetric causality
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