Impact of Macroeconomic Indicators on Facilitating Foreign Direct Investment(FDI) In Bangladesh: A Time Series Analysis

Foreign direct investment (FDI) plays a crucial role in promoting economic growth through capital accumulation, technology transfer, employment generation, and productivity enhancement. Despite Bangladesh's sustained economic growth and extensive policy initiatives to attract foreign investors, FDI inflows have remained comparatively low relative to other emerging Asian economies. This study examines the impact of selected macroeconomic indicators on FDI inflows in Bangladesh using annual time-series data from 1994 to 2022. In addition to conventional macroeconomic determinants, the study incorporates two underexplored variables—per capita electricity consumption as a proxy for energy infrastructure and tax revenue as a percentage of GDP as a measure of fiscal capacity—to provide a more comprehensive assessment of the investment climate. The analysis employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to investigate both the short-run and long-run relationships between macroeconomic indicators and FDI, following unit root and diagnostic tests to ensure model robustness. The findings are expected to identify the macroeconomic factors that significantly influence FDI inflows and provide evidence on the role of infrastructure development and fiscal capacity in attracting foreign investment. The study contributes to the literature on FDI determinants in developing economies and offers policy recommendations to strengthen Bangladesh's investment environment in support of its long-term development objectives.