Revisiting endogeneity among foreign direct investment, economic growth and stock market development

Moderating role of political instability

Mohammad Enamul Hoque, Tahmina Akhter, Noor Azuddin Yakob

Research output: Contribution to journalArticle

Abstract

This study investigates the endogeneity among foreign direct investment, economic growth, and stock market development, along with the moderating role of political instability on the relationship among foreign direct investment, economic growth, and stock market development. The study employs selected macroeconomic variables data for the period of 1993–2016 with Auto Regressive Distributed Lag (ARDL) system and hierarchical regression approach for hypothesis testing. This study discovers that there are short-run and long-run association among economic growth, foreign direct investment, and stock market development. In the long run, only unidirectional relationship exists among economic growth, foreign direct investment, and stock market development. However, in the short-run, bidirectional relationship is evident between economic growth and stock market development. This study reveals that foreign direct investment partially mediates the relationship between economic growth and stock market development; and political instability negatively moderates the economic growth and stock market development nexus, the foreign direct investment and stock market development nexus, and the economic growth and foreign direct investment nexus. Therefore, this study suggests that political stability is a must for Bangladesh to achieve stock market development, to increase the foreign direct investment inflows, and to achieve long term sustainable growth.

Original languageEnglish
Pages (from-to)1-21
Number of pages21
JournalCogent Economics and Finance
Volume6
Issue number1
DOIs
Publication statusPublished - 1 Jan 2018

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Political instability
Stock market development
Foreign direct investment
Endogeneity
Economic growth
Short-run
Bangladesh
Hierarchical regression
Macroeconomic variables
Sustainable growth
Distributed lag
Hypothesis testing
Political stability

Keywords

  • Bangladesh
  • E44
  • economic growth
  • F30
  • FDI
  • G0
  • G10
  • G38
  • political instability
  • stock market

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Revisiting endogeneity among foreign direct investment, economic growth and stock market development : Moderating role of political instability. / Hoque, Mohammad Enamul; Akhter, Tahmina; Yakob, Noor Azuddin.

In: Cogent Economics and Finance, Vol. 6, No. 1, 01.01.2018, p. 1-21.

Research output: Contribution to journalArticle

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