Abstract:
This research is aimed at tracing the impact of
Foreign Direct Investment (FDI) in promoting macroeconomic
variables such as gross domestic production, industrial
production, total domestic investment, exports, imports, Board of
Investment approved exports, Board of Investment approved
imports and Board of Investment approved employments by using
the time series annual data for 1978 - 2018 in Sri Lanka. Multiple
Regression Analysis was used to estimate the impact of FDI on
selected macroeconomic variables. Estimation method was
Ordinary Least Squares. EViews 10 software were used for data
analysis. The empirical evidence shows that there is a statistically
significant positive impact of FDI on selected macroeconomic
variables except in the case of imports. However, this study
further reveals that the actual impact on macroeconomic
variables can be felt after certain time lag. But the impact on total
domestic investment was realized immediately. Further, this
research has identified various problems faced in attracting FDI
including ideal sector identification and the appropriate
recommendations have been presented in order to realize the
major benefits from FDI inflow into the country.
