FDI has become a desired form of incoming investment for capital-poor nations like Bangladesh. Therefore, a critical analysis of macroeconomic constituent’s influ- ences that determine the inflow of this “Investment-Blood” is undoubtedly rational. The study is conducted to shed empirical light on the relationship between FDI and other macroeconomic variables in Bangladesh, which is believed to assist modifica- tions at the policy level. Resorting on annual time-series data and harnessing ARDL bounds testing and Error Correction Model, this study detects a long-run relation- ship between inward FDI and a set of regressors. The study finds no impact of inter- est rate and foreign reserve on FDI. Export is inversely related to FDI. This study reveals a substitutionary effect of export on FDI, which suggests applying the Heck- scherohlin model to reduce redundant exports by producing goods only in which the nation has a comparative advantage to create more room for FDI. In other words, to attract more FDI, Bangladesh has to make a trade-off in export. This paper recom- mends adopting FDI-led development as an intermediary solution until export can surpass the total import. The effects of import, current account balance (CAB), and per capita GDP are all positive. The findings further disclose that the CAB gap due to reduced export can be mitigated with more FDI. Electricity production has an inverse effect on FDI for high energy production costs. Thus, to attract more FDI in Bangladesh, this paper’s robust findings suggest increasing the interest rate, decreas- ing unnecessary export, and relying more on renewable energy sources.

 Introduction

 In the last few decades, a tremendous change in international capital flow has been observed across the universe. Following the trend, FDI has become a desirable capi- tal source for most developing and emerging nation economies. Moreover, for some nations, the volume of the total FDI crowds out the domestic investments. A dynamic economy is challenging to obtain for most of the capital impoverished nations. Therefore, these capital-poor nations find it hard to deal with inconvenient economic indicators. When globalization and trade liberalization have curtailed the world at the time of the fourth industrial revolution, countries with an inadequate amount of capital have some hope left because of this capital “without a boundary.” FDI is considered a source of external capital and an origin of sage, intelligence, and technology. FDI facilitates technological and knowledge spillover, industrial linkages, and stir up the production potentiality as well as heightens sustainable production capacities of the homebound firms

FDI creates a trajectory to exchange capital between the recipient and the sup- plier nations. However, it is not easy to obtain the desired amount of capital as the competition for the fund is fierce, and nations who can demonstrate their potentiality of harnessing the investment in effective ways only become successful in obtaining it. Plenty of empirical literature is available on the country-specific determinants for attracting inward FDI. These determinants are dynamic, and over time, uncharted country-specific parameters have been discovered. Many works of literature have focused on the per capita GDP not only because it plays a crucial role in attracting more inward FDI but also as the growth rate is a primary focus of nations willing to invest.