Economic Impact of Foreign Direct Investment in Sri Lanka

This paper investigates the long-run relationship and causality between real per capita GDP, foreign direct investment (FDI) and the level of the infrastructure in Sri Lanka over the period 1980 to 2011. Level of the infrastructure has been measured by using a summary measure based on principal component analysis. Analysis shows that there is a long-run relationship between real per capita GDP, foreign direct investment (FDI) and the level of the infrastructure. The empirical results further confirm the unidirectional causality from level of the infrastructure to FDI. DOI: http://dx.doi.org/10.4038/ss.v41i1.4684 Staff Studies – Volume 41 Numbers 1 & 2, 89-115