Abstract

FDI is an essential determinant to any country as it boosts economic growth through increasing technological knowledge, managerial skills, and efficiency of resources. The primary purpose of this study is to seek out FDI’s impact on exports and employment in Bangladesh. This study conducts with two models. The first one is FDI and its impact on Export in Bangladesh with the time range of 1972 to 2017. The industry value added is the control variable, the dependent variable is exported, and FDI is considered the independent variable. The impact of FDI on employment in Bangladesh with the time range of 1991 to 2017 is the second model where GDP growth and exports are the control variables. ARDL BT approach and Error Correction Model (ECM) are applied to determine the long-run and short-run association among the variables. The ARDL result of the 1st model shows that it has a long-run relationship among the variables. The Bound testing approach indicates a long-run association among variables. The coefficient of the ECM-ARDL Model is negative and significant. The ECT (error correction term) is -0.430 reveals that adjustment is corrected from the short run to the long run by 43% towards the equilibrium of exports. The Granger causality test result shows the bidirectional causality between industry value-added and exports. The ARDL approach reveals the long-run association between dependent and independent variables at a 1% significance level in the second model. FDI’s coefficient indicates a 1% increase in FDI will increase employment by 0.01% on average, which is statistically significant. From the pair-wise Granger causality test result, the study has found bidirectional causality between GDP growth and employment. Unidirectional causality is detected between FDI and employment, exports and jobs, and FDI and exports.