Political stability, foreign direct investment and remittance inflow in Bangladesh : an empirical analysis

Abstract

This study investigates the causal relationship between political stability, foreign direct investment and remittance inflows in Bangladesh. To examine this causal nexus, we use political stability and absence of violence indicator from World Bank’s good governance indicator data base and foreign direct investment, and remittance data from the International Monetary Fund data base, for the period 1996-2013. Both short run and long run relationship are investigated by testing cointegrating relationships and employing a vector error correction model (VECM). Our results suggest that i) political stability has a positive impact on foreign direct investment and remittance inflows in the long run, ii) political stability has positive impact on remittance in short run but there is no significant relation between political stability and foreign direct investment in the short run.