Exploring the Long-Term Relationship between Foreign Direct Investment and GDP: Empirical Insights from Bangladesh

Abstract

The study's purpose is to examine the long-term correlation between Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) in Bangladesh. The article is mostly based on secondary data collected from Bangladesh Bank’s website covering for the period 1980-2021. Data were processed with the assistance of the Statistical Package of Social Science (SPSS IBM 23 Version). Correlation and regression analyses were used to examine the data in the study. The results suggest that there is a high degree of positive correlation (0.976) between FDI and GDP, along with the implication that FDI has a significant positive impact on GDP in the long run within the Bangladesh economy. The results also suggest that if FDI changes by 1 unit, then the GDP will positively change by 0.92381 at the level of 5% significant statistically. This finding is reinforced by the regression analysis, which indicates a statistically significant relationship between FDI and GDP growth. So, it is understandable that there is a well-built impact of FDI on Gross Domestic Product (GDP) in the long-run in the Bangladeshi economy. These results are further supported by regression analysis, underscoring a statistically significant relationship between FDI and GDP growth. However, it is important to acknowledge certain limitations, such as data availability constraints and potential confounding variables not addressed in the analysis. Future research endeavors could address these limitations and explore additional factors influencing the FDI-GDP relationship in Bangladesh. Overall, the study highlights the substantial impact of FDI on Gross Domestic Product in the long run and discusses policy recommendations to attract FDI inflows to Bangladesh.