Acta Universitatis Danubius. Œconomica, Vol 14, No 2 (2018)

Abstract

The broad objective of this study is to determine how government policy influences FDI as well as how FDI affects the level of unemployment as a proportion of labour force in emerging economies. The techniques of analysis are a descriptive statistic and panel regression based on Ordinary Least Squares Method. Evidence from the descriptive analysis affirms that the variables of the study for each country exhibit contradictory behaviour in 1991-2016. In the same period, the big beneficiaries of the net inflow FDI are not experiencing the lowest unemployment rate. Panel regression results (2000-2015) suggest that net inflow of FDI has a negative influence on unemployment while government policy has no significant effect on the net inflow of FDI. The study concludes that a continuous inflow of net foreign investment is a good source of creating jobs in emerging economies. Due to the lack of influence of government policy on the net inflow of FDI, the study recommends that emerging economies should revise the regulation on the freedom to trade internationally so as to enhance the continuous flow of foreign direct investment.