Impact of Sectoral Infrastructure on Export and Foreign Direct Investment Inflow: Evidence from Selected South Asian Economies by Applying a New Global Infrastructure Index

AbstractThis study investigates the dynamic effect of decomposed infrastructure development on foreign direct investment inflow (FDI) and export from selected South Asian countries by applying advanced econometric approaches. Our empirical results demonstrate that aggregated and disaggregated infrastructure development indicators (including the transport, energy, financial, and telecommunication sectors) significantly promote FDI and export in the long run. Human capital and quality of institutes spur export while the exchange rate impedes it. Besides, exchange rate, human capital, and institutional quality are driving factors to promote FDI inflows. Our findings are robust under different econometric approaches. Panel Granger causality found no reverse causality between infrastructure, and our two regressed both export and FDI inflows. The study offers policy insights to comprehend the long-run role of infrastructure to explain export and FDI inflows equations.