Abstract:
This study analyzes the effects of FDI inflows on EPZs in terms of export of EPZ and
employment in EPZs using secondary data from 1997 to 2018 in Bangladesh. The
study has applied Generalized Method of Moments (GMM) model for export of EPZ
and Auto Regressive Distributed Lag (ARDL) bound test approach for employment
generation, respectively. Inward FDI is the key explanatory variable, and there are
also some control variables to overcome the problem of omitted variables. The
empirical results show that FDI inflows in EPZs positively influence export volume
and employment generation. The valid empirical results are diagnosed by several
tests, and the stability of the models is also checked by CUSUM and CUSUM square
tests. GMM approach supports our first hypothesis that FDI inflows have a positive
impact on EPZ export, and it is statistically significant. ARDL bound test approach
supports our second hypothesis that in the long-run and short-run, there is a positive
association between FDI inflows and EPZ employment. Most of the researchers have
done research on the effects of FDI on the economic growth in Bangladesh. Some of
the researchers have also examined the effects of FDI on domestic investment, trade,
and other sectors of the economy. But as far as we know, the effects of FDI on EPZs
in Bangladesh are not examined. The study will use secondary data to explore the
possible effects for the export processing zones in Bangladesh and how the local
firms will benefit from foreign investors. We cannot deny the limitations; the
reliability of data cannot be confirmed, observation is small as some variables are
not available before 1997 and after 2018
