This paper examined the relationship between Foreign Direct Investment inflows and trade openness in the South Asian economies. In literature there had been diversification about this relationship. Some studies approved positive and significance relationship between FDI and Trade Openness and some found it insignificant. Our study examined the relationship of 7 countries for the time period of 12 years from 1998 to 2010 with panel data. On our data random effects were estimated. Trade openness was measured by three indicators, in terms of imports, exports and a joint combination of both the factors. The results suggested that there is significance relationship between trade openness and foreign direct investment inflows. Trade openness has positive and significance effects for FDI inflows in South Asian countries.
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