The Nexus Among Foreign Direct Investment, Economic Growth, and Country Risk: An Aggregated and Panel ARDL Analysis

The purpose of this article is to investigate and analyze the relationship among FDI, economic growth, and country risk. Using a panel study, based on data from 131 countries spanning the period of 1995 to 2018, we find that investors prioritize risk perception over economic profits. They tend to favor low risk countries with lower default risk, even if the expected return is also lower. Consequently, advanced countries with reduced default risk attract more capital inflows. Thus, advanced countries with lower default risk attract more capital, and the responses of FDI to the independent variables are rather short in nature.