Navigating the Path to Increase FDI in South Asia: The Role of Economic Freedom

Abstract

Scholars and policymakers have paid special attention to the link between economic freedom and FDI. This research aims to examine this relationship within the South Asian context through a panel data analysis from 2001 to 2021. A panel fixed effect model is employed to assess the influence of economic freedom on FDI and other controlling variables, such as GDP per capita, population density, inflation, government expenditure on education, and general government final consumption expenditure are also taken into consideration. The results indicate that an increase in economic freedom, GDP per capita, population density, and government consumption leads to an increase in FDI. These findings suggest that South Asian policymakers should prioritize increasing economic freedom as a means to attract more FDI. This study offers valuable insights for policymakers seeking to comprehend the factors affecting FDI and ways to increase it in their respective countries. By promoting economic freedom, a more favorable investment climate can be created, thereby attracting more FDI which may help to create jobs, and improve living standards for citizens.