How do Institutions matter for International Business? Evidence from SAARC Countries
DOI:
https://doi.org/10.14666/2194-7759-11-1-003Keywords:
Corruption, Political Sability, FGLS, Democracy, Exports, Imports, FDI, SAARCAbstract
Institutions matter for smooth businesses within the country and across countries, and their role in international trade and finance has caught much attention in the last decade. Many institutional and governance factors affect the volume of export, import and foreign direct investment, which are the crucial source of earnings for the populous region of SAARC. This paper examines the impact of institutions on international business by using the Feasible Generalized Least Square (FGLS) method from 2001 to 2019. The selected institutional indicators are government stability, external conflict, corruption, law and order, and democratic accountability. Estimation indicates that democratic accountability and political stability promote trade and FDI, while external conflict negatively affects international business. Control of corruption promotes trade. The research findings can guide policymakers in devising the policies related to the institutions.
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