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Examining the Impacts of GDP, Trade Openness, Freedom Index and the Internet on FDI: Comparison of Countries with Panel ARDL

Author

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  • Tuğba Güz
  • Coşkun Parim
  • Erhan Çene

Abstract

The main purpose of this study is to examine the impacts of GDP, trade openness, the freedom index and the internet on FDI in 54 countries, including developing, transition and developed countries, over the period 1995-2021. First, the variables affecting FDI are determined. Then, first- and second-generation unit root tests are conducted for panel data to investigate stationarity. Finally, long- and short-run relationships between variables that have an effect on FDI are exhibited with panel cointegration tests and panel ARDL analysis. Among 17 candidate variables, internet, GDP, the freedom index and trade openness are determined to affect FDI. GDP, the internet and the freedom index have a significant positive and trade openness has a significant negative relationship with FDI in the short run. Finally, there is a long-term equilibrium between FDI and all the variables. Trade openness also has negative coefficient in developing countries such as China, Brazil and Turkey. This is a unique study in which empirical findings are given for each country with the PMG model, which would aid the policy implications identified for the 54 countries, including developing, transition and developed countries.

Suggested Citation

  • Tuğba Güz & Coşkun Parim & Erhan Çene, 2025. "Examining the Impacts of GDP, Trade Openness, Freedom Index and the Internet on FDI: Comparison of Countries with Panel ARDL," Politická ekonomie, Prague University of Economics and Business, vol. 2025(1), pages 88-124.
    • Handle: RePEc:prg:jnlpol:v:2025:y:2025:i:1:id:1445:p:88-124
    DOI: 10.18267/j.polek.1445
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    References listed on IDEAS

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    1. By Gunnar Jonsson & Arvind Subramanian, 2001. "Dynamic Gains from Trade: Evidence from South Africa," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-8.
    2. Godfred William Cantah & Gabriel William Brafu-Insaidoo & Emmanuel Agyapong Wiafe & Abass Adams, 2018. "FDI and Trade Policy Openness in Sub-Saharan Africa," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(1), pages 97-116, January.
    3. Agiomirgianakis, G. M. & Asteriou, D. & Papathoma, K., 2003. "The determinants of foreign direct investment: a panel data study for the OECD countries," Working Papers 03/06, Department of Economics, City University London.
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    More about this item

    Keywords

    Foreign direct investment; GDP; trade openness; freedom index; internet; panel ARDL; JEL Codes: C01; C10; C22; C58; F40;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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