The Impact of the Components of FDI Inflows on GDP Growth: An Empirical Analysis for Bangladesh

This study seeks to assess the effects of the components of FDI inflows on GDP growth in Bangladesh covered the years 1997 to 2021. For this, three components of FDI (equity capital, reinvested earnings and intra company loans) along with labor force and trade openness have used in this analysis. By employing ARDL Bound Test, the coefficients of reinvested earnings and intra company loans provide a significantly positive relationship with GDP growth both in the short run and the long run. Whereas, the coefficient of equity capital has positive but insignificant impact on GDP growth in the long run. Besides, labor force and trade openness has positive and significant impact on GDP growth. Several diagnostics tests demonstrate that the model is normal, stable, and there is no serial autocorrelation or heteroscedasticity. The study suggests that FDI inducing policies will enhance the economic growth, mitigate the effects of the COVID-19 pandemic and meet up the sustainable development goals (SDG).