Effect of Domestic Investment and doing business index on foreign direct investment in selected country

Subject Areas : Financial Economics

Negar Jafari Fesharaki ¹ , Abbas Memarnejad ² , seyed shamseddin hosseini ³ , kambiz hojabr kiani ⁴

1 - Department of Economics, one of sciences and investigations, Islamic Azad Daneshgah, Tehran, Iran
2 - Department of Economics, one of sciences and investigations, Islamic Azad Daneshgah, Tehran, Iran (responsible author
3 - economic management and economic department, islamic azad university science and research branch. tehran. iran
4 - economic management and economic department, islamic azad university science and research branch. tehran. iran

Received: 2023-11-24 Accepted : 2024-01-23 Published : 2024-03-20

Keywords: Keywords: Foreign Direct Investment, K22, Ease of doing business, Gross Fixed capital formation. JEL classification: O11, E22  ,

Abstract :

Abstract Investment is one of the main component of aggregate demand in economy which plays a crucial role in the economic fluctuations and economic growth of each country So economist and policymakers focused on interpret of Investment behavior.  One of the most important factors in the decision to invest in both domestic and foreign investment is the existence of a secure environment. in other words, the most important factors is the proper investment environment and what has been interpreted as the ease of doing business. In such a way that improving the ranking of countries in business environment indicators is one of the prerequisites for attracting domestic and foreign capital and as a result investment. The main goal of this study is to investigate the effect of indicators of ease of doing business and domestic investment on foreign direct investment in selected countries. For this purpose, based on the division of the World Bank, four groups of countries are considered by their income level, including low-income countries, lower middle-income countries, upper middle-income countries and high-income countries, and the effect of domestic investment and indicators of ease of doing business have been evaluated using a Panel data model. The result shows that the level of development of countries and their income influences the magnitude and effect of domestic private investment and indicators ease of doing business on FDI. In a low-income, lower middle income and high-income countries, the effect of investment on foreign direct investment is positive, and in the upper middle countries, this has a negative effect. Meanwhile, the effect of each indicator of ease of doing business on foreign investment varies depending on the income level of countries.

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