Economic Research and Perspectives

Economic Research and Perspectives

Study of the Impact of Democracy and Corruption on Foreign Direct Investment in West and East Asian Countries

Document Type : Original Research

Authors
Hadiseh Taghizadeh Elyas Abad 1
Ali Rezazadeh 2
khalil jahangiri 2
1 M.A. in Economics, Urmia University, Urmia, Iran
2 Assistant Professor, Department of Economics, Urmia University, Urmia, Iran
Abstract
The purpose of this research is to study the effects of democracy and corruption on attracting foreign direct investment in West and East Asia. To do this, a dynamic panel model and generalized method of moments are employed over the period 2009-2018. The results of the estimates for the 13 countries of the West Asia Group indicate a positive and significant relationship between the democracy and foreign direct investment and the existence of a significant negative correlation between corruption and the consumer price index with the foreign direct investment. Also, in this group of countries, the effects of the degree of trade openness, democracy and real exchange rate on foreign direct investment were positive and significant and the effects of corruption and consumer price index were negative and significant. Besides, according to the results of this method for 15 East Asian countries, the corruption and consumer price index had negative and significant effects, and the democracy, corruption, trade openness, economic growth and real exchange rate had positive and significant impacts on foreign direct investment. Therefore, regarding the effect of democracy on attracting foreign direct investment, Jensen's theory was approved in both groups of countries, but regarding the effect of corruption on FDI, in East Asia the theory of helping hand of corruption and in West Asia the theory of destructive hand or the corruption was confirmed. According to the results, the impact of these variables on foreign direct investment in the East Asian group was greater than the West Asian group.
Keywords
Democracy
Corruption Perception index
Foreign direct investment
West and East Asian Countries
Generalized Method of Moments(GMM)

Subjects

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Economic Research and Perspectives
Volume 21, Issue 3
Autumn 2021
Pages 109-144