The effect of regulatory quality on foreign direct investment absorption in selected countries group

Foreign investment, specifically foreign direct investment (FDI), has found a special status in many countries around the world. The third world countries, including developed and developing countries make extensive efforts to lead these financial resources toward their own countries. Among the most important tasks done by countries for absorbing foreign investment resources is to provide the conditions and pave the ground for investment and doing economic activities in a secure and safe environment, to amend the related regulations, and to facilitate the process of executing the investment projects and other similar tasks. On this basis, the present research is principally aimed to investigate and study the effect of regulatory quality on foreign direct investment in the group of selected countries with medium level of income. The results obtained from model estimation using fixed effects method and generalized momentums method (GMM) during 2002-2013 period show that the regulatory quality has a positive and significant effect on absorption of foreign direct investment in the group of selected countries with medium-level income. Those countries which have successfully provide the conditions and pave the regulatory ground for investment, have been successful in absorbing the foreign investment too.