The Moderating Role Of Governance Indicators In The Effect Of Foreign Direct Investment And Military Expenditure On Economic Growth In Low-Income Countries

Authors

  • Alia Putri Fadhilah University of Lampung
  • Arni Maharani University of Lampung
  • Fitri Silvia Amanda University of Lampung
  • Marsha Qonita Saputri University of Lampung
  • Naufal Dwiky Athalla Rizky University of Lampung

Keywords:

Foreign Direct Investment, Military Expenditure, Economic Growth, Governance Indicators, Low-Income Countries

Abstract

This study examines the effect of Foreign Direct Investment (FDI) and military expenditure on economic growth and the moderating role of governance indicators in low-income countries. Economic growth is measured using annual GDP growth (%), while governance quality is represented by Voice and Accountability, Control of Corruption, and Regulatory Quality. Using panel data from low-income countries during 2002–2024, this study applies the Random Effect Model (REM) with robust standard errors. The results indicate that FDI has a positive but insignificant effect on economic growth, whereas military expenditure has a positive and marginally significant effect. Voice and Accountability strengthens the relationship between FDI and economic growth, while Control of Corruption weakens it. Regulatory Quality does not significantly moderate the effect of FDI but marginally strengthens the relationship between military expenditure and economic growth. These findings suggest that governance quality plays an important role in supporting economic growth in low-income countries.

References

Chang, H.-C., Huang, B.-N., & Yang, C. W. (2011). Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach. Economic Modelling, 28(6), 2416–2423. https://doi.org/10.1016/j.econmod.2011.06.001

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The Worldwide Governance Indicators: Methodology and Analytical Issues. World Bank Policy Research Working Paper No. 5430. Washington, DC: World Bank.

Rahman, S. U., Zhao, S., & Junaid, D. (2023). The FDI inflows in low-income and lower-middle-income countries: The moderating role of military expenditure. International Journal of Sustainable Economy, 15(1), 1–23.

Saha, S., Sadekin, M. N., & Saha, S. K. (2022). Effects of institutional quality on foreign direct investment inflow in lower-middle income countries. Heliyon, 8(10), e10828. https://doi.org/10.1016/j.heliyon.2022.e10828

Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), 65–94. https://doi.org/10.2307/1884513

Swan, T. W. (1956). Economic growth and capital accumulation. Economic Record, 32(2), 334–361. https://doi.org/10.1111/j.1475-4932.1956.tb00434.x

Downloads

Published

2026-06-17

How to Cite

Fadhilah, A. P., Maharani, A. ., Amanda, F. S. ., Saputri, M. Q. ., & Rizky, N. D. A. . (2026). The Moderating Role Of Governance Indicators In The Effect Of Foreign Direct Investment And Military Expenditure On Economic Growth In Low-Income Countries. DAS CONFERENCE INTERNATIONAL SERIES, 4, 247–252. Retrieved from https://journal.das-institute.com/index.php/proceeding/article/view/1429

Issue

Vol. 4 (2026): Proceeding International Conference on Global Economic Dynamics

Section

Articles Proceeding

License

Copyright (c) 2026 Alia Putri Fadhilah, Arni Maharani, Fitri Silvia Amanda, Marsha Qonita Saputri, Naufal Dwiky Athalla Rizky

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Most read articles by the same author(s)