FDI in the energy and power sector and economic growth in Bangladesh

This study presents a discussion on the current energy and power situation of Bangladesh, and examines the causal relationship between foreign direct investment (FDI) in the energy and power sector and economic growth of the country. Causality analysis by using data for the period 1972-2010 reveals that there are robust positive and unidirectional short-run causal relationships running from FDI to energy use and from energy use to GDP growth. Results also confirm a causal relationship for the energy use equation in the long-run. Considering the resource and technology requirements for the development of the energy and power sector, FDI should be encouraged in this sector that could help achieve the targeted GDP growth in Bangladesh.