The impact of institutions on economic growth is examined using indicators provided by some country risk and FDI. This paper examines the relationship among institutions and FDI, economic growth.
We investigated whether making individual provision for accelerating FDI than the formation of a wide range of law that includes customary law increase FDI. We have gained following results.
(1)The formation of institutions promotes FDI, and an increase in FDI accelerates GDP growth.
(2)All institutions indicators increase FDI and economic growth.
(3)Loosening capital account regulations lead to FDI inflows and economic growth.
(4)Both loosening capital account regulations and formation of law system that includes customary law enhances an increase in FDI and economic growth. Investor's reliance to property right and government and the judicial systems is important.
(5)Although an increase in FDI performs on economic growth importantly, formation of law system that includes customary law increases FDI most.
Making of individual provision for FDI does not increase FDI enough. Our estimates indicate that maturity as a constitutional country is essential.