Nexus Between Institutional Quality and Foreign Direct Investment Inflows: Panel Data Analysis of SAARC Countries

This study examines the nexus between institutional quality and FDI inflows in SAARC countries for the sample period of 1996–2017. The analysis is carried out using panel ARDL and panel quantile regression to draw the inferences. Empirical findings reveal that corruption, political stability, government effectiveness, and GDP per capita have a positive and statistically significant impact on FDI inflows. The result of panel quantile regression shows that all the estimates of government effectiveness, GDP per capita, and trade openness are positive and statistically significant. This exploration suggests that institutional quality matters to the progression of FDI inflows. Along these lines, effective institutional changes should be a precedence for policymakers as this sets up an admirable investment climate to pull in FDI inflows in SAARC countries.