Analyzing the Impact of Foreign Direct Investment, Energy Consumption on Services Exports, and Growth of the Services Sector: Evidence from SAARC Countries

This paper investigates the impact of services FDI inflows on service exports in selected South Asian countries by employing panel data techniques from 2000 to 2020. For robustness of panel data analyses, the study uses second-generation approach and a heterogeneous procedure for panel data for Southern Asia from 2000 to 2020. The empirical investigation of long-term impacts driven by augmented mean group (AMG), common correlated effects mean group (CCEMG), and mean group (MG) assessors further supports the significant and positive impact of FDI, economic growth, and energy consumption. The paper discovered robust evidence that FDI inflows in the service sector significantly contribute to the increase in services exports in the South Asian region. The findings of the paper have important policy implication for boosting exports and addressing the problem of perennial trade deficit in the South Asian region. The results reveal that adoption of investment liberalization policies is essential for South Asian countries to attract services sector FDI to enhance the services exports and to move toward the path of economic stability.