An Analysis of the Literature on Political Stability and Foreign Direct Investment

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An Analysis of the Literature on Political Stability and Foreign Direct Investment

ABSTRACT

It is widely believed that foreign direct investment plays an essential role in the growth path of developing economies by augmenting domestic capital to meet the desired gross investment and growth target. This paper reviews recent empirical literature on the rapport of political stability and FDI inflow from 2000 to 2017. The growing significance of institutional environment in encouraging FDI inflow as well as the increasing literature on the link between these factors motivated us to review the empirical studies in this area. The paper has revealed that various models have been employed by previous studies in analyzing political stability-FDI nexus depending on the aim of the study. Most of these empirical investigations reported positive significant relationships, though some studies have concluded otherwise. The findings of various scholars have been discussed and areas of concern have been highlighted. The paper concludes on the need for more studies in this area and makes suggestions for future research so as to come up with more appropriate recommendations that are suitable to different jurisdictions with the whole objective of promoting FDI inflow to support economic growth and development.

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