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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: Relationship between Economic Freedom and Foreign Direct Investment: Panel Cointegration Analysis
Author(s): Emrah Sofuoglu, Oktay Kizilkaya, Dogan Uysal
Volume: 10
Number: 2
Year: 2019
Page: 341-355
ISSN: 2619-9491
DOI Number: 10.20409/berj.2019.172
Abstract
Economic freedoms have recently become one of the most important institutional indicators that attracted the attention of researchers. The level of economic freedom of a country is thought to be an important factor in attracting investments. This study aims to examine the relationship between economic freedom and foreign direct investment. In this context, countries need to establish efficient policies for economic freedoms to increase foreign direct investments. To this extent, most attractive foreign direct investment countries (The U.S, Hong Kong, China, Ireland, Netherlands, Switzerland, Singapore, Brazil, Canada and India) are investigated in the study. The study covers the period 1995-2015 and Pedroni cointegration test, panel FMOLS and panel DOLS methods are utilised to determine the relationship between the variables. According to analysis findings, there is a long-term relationship between economic freedom and foreign direct investment. In addition, both panel FMOLS and DOLS results indicate that economic freedom has a positive impact on foreign direct investment in the long term. These findings are evaluated and some policy recommendations are suggested in the conclusion part.

Keywords: Economic Freedom, FDI, FMOLS, DOLS, Panel Data Analysis

JEL Classification: C23, F14, F49

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