Policy oriented fundamentals as the determinants of FDI inflows.

Nevertheless, study done

by Globerman and Shapiro (1999), and Banga (2003) arethe prominent studies that have
focused on government policies on the flows of FDI. Globerman and Shapiro (1999) tried to
identify the role of government international policies on FDI in Canada and found that
multilateral policies have statistically significant impact on FDI inflows. On the other hand,
Banga (2003) tried to identify the role of overall economic policy oriented variables on FDI
inflows in fifteen developing countries . Using random effect model, the author has found
that bilateral and regional investment treaties played the major role in attracting FDI in
developing countries.

After careful review of the existing literatures on the determinants of FDI inflows, current
study has attempted to see the impact of economic fundamentals on the flows of FDI in
SAARC member countries. The main reason behind the selection of SAARC member
countries is all the member countries are developing countries and are highly dependent on
FDI for economic growth and development. The main objective of the present study is to
identify the impact of overall economic policy oriented economic fundamentals on the flows
of FDI in South Asian countries. To attain the objective, present study has collected data on
FDI and economic fundamentals for the period from 1972 to 2016 on seven SAARC member
countries. Using different panel estimation techniques, this study found that market size
(GDP) played the vital role in getting FDI in the South Asian countries. The author expects
that this study will helpthe policy makers to have firsthand knowledge on the determinants of
FDI inflows in South Asia and take necessary policies to attract foreign investors.