Foreign Capital Inflows and Economic Growth in Bangladesh

Published Online: 10 August, 2022 || Published in Print: 30 November, 2022

Abstract

This study is conducted to illustrate the relationship between foreign capital inflows and the economic growth of Bangladesh. The main aim of this study  is to find out the contribution of foreign capital inflows to the economic growth of the country. By applying the pairwise Granger causality test (1969) based on time series data for the last 20 years, this study found that there is no causality of GOP with different sources of foreign capital revealing that foreign capital inflows do not have any significant impact on the economic growth of Bangladesh. There is a unidirectional relationship between Foreign Direct Investment (FDI) and external debt and another unidirectional relationship between external debt and remittance (RM). This unidirectional relationship shows that FDI granger causes ED, and ED granger causes RM. This shows that the sources of foreign capital are moving together for Bangladesh . Bangladesh is one of the lowest foreign capital receivers compared to other Asian countries . So, to reap the benefits of foreign capital inflows like other developing and emerging economies, Bangladesh should develop proper policies and provide incentives to investors to make it an attractive destination for foreign investors.