Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) in Bangladesh: A Cointegration Analysis

Abstract

This paper investigates the long-run relationship between GDP and FDI in Bangladesh for a period of 42 years ranges from 1972 to 2013 by using time series econometric technique. The empirical results show that there is a significant positive correlation between GDP and FDI. The results also show that FDI and GDP are cointegrated in the long-run. For the supplement of the results of cointegration analysis, this study also examine the causal relationships by using Granger causality test and find strong evidence for unidirectional causality running between GDP through FDI in the long run.

Keywords: FDI, GDP, Unit Root, Cointegration, Granger Causality