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Research Journal of the University of Ruhuna, Sri Lanka- Rohana 12, 2020

and Vector Autoregressive framework (VAR) to identify a long-term relationship
between political instability and FDI using a panel of small economies.

Recently, Tampakoudis et al. (2017) investigated the determinants of FDI in average

income countries. The study used panel ordinary least square method on group of 15
moderate-income countries for the period 1980 – 2013 to demonstrate that GDP,

trade openness and population growth of the country play a vital and significant role
to attract FDI in the selected countries. Makun (2018) has tried to figure out the

relationship between economic growth and FDI and other influencing external

factors in Republic of the Fiji Islands. Using unit root test and cointegration analysis
with ARDL model for the period 1980 – 2015, he demonstrates the long-run

association between GDP, FDI, imports and remittances. It has been suggested that
the government should pursue appropriate policy actions to reduce imports and draw

remittances and foreign direct investment to improve economic growth.

Rashed (2019) analysed the relationship between FDI and macroeconomic factors in

Asian countries using the fixed effect model and simple regression analysis over the
period of 2003 – 2017. The study found that the trade openness and exchange rate

have a significant impact on FDI inflows in China, Indonesia, Jordan, Pakistan, and
Vietnam. Thampakondis et al. (2017) studied the effect of some determinants on

FDI inflows to middle – income countries employing the panel data regression

model for the period of 1980 – 2013.

Hassan et. al (2014) carried out an investigation on FDI inflows to china from five
Asian countries (Malaysia, Thailand, the Philippines, Indonesia, and Singapore)

over the period from 1990 to 2004 based on the results from the estimated regression

model. The results indicated that for most countries, openness and GDP are
significant variables in explaining the FDI flows to China. A recent study by Bitar

et.al (2019), using the principal component factor analysis, found that there is a
significant causality between political risk factors and FDI inflows to Lebanon for

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