Impact of Macroeconomic Factors on Foreign Direct Investment in Agro-sector: A Cointegration Analysis Based on Bangladesh

Authors/ Publisher: Sharifa Akter Nipa

Abstract:

Abstract

The role of foreign direct investment (FDI) is crucial in terms of agri-sector for fostering productivitiy, safeguarding food safety, balancing ecology, and shifting traditional to the modern systems of the environment. This study entailed macroeconomic issues such as economic growth, inflation, trade, and exchange rate onwards of FDI flows in agriculture using annual data from 1990 to 2022. Using fully modified OLS (FMOLS) and dynamic OLS (DOLS), this study observed that economic growth bolstered inflows of agriculture from the foreign side on some regression models but inflation and exchange rate reduced it. Hence, policymaking needs to be addressed to stabilize the speed of high inflation and balance exchanging rates with flexibility so that investors can raise their interest to augment their volume of currencies in agriculture. Besides, trade policy needs to be changed, omitting bureaucratic inactivities, merging gaps in export and tariff protection, and ensuring import liberalization without hurdles.