University of Tehran Iranian Economic Review 1026-6542 28 1 2024 04 01 Foreign Direct Investment and Private Domestic Investment: Does Institutional Quality Matter 220 237 96651 10.22059/ier.2024.337199.1007365 EN Rossanto Dwi Handoyo Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia 0000-0002-4133-1207 Kabiru Hannafi Ibrahim Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia; Department of Economics, Faculty of Social and Management Sciences, Federal University Birnin Kebbi, Birnin Kebbi, Nigeria 0000-0002-2252-5735 Wahyu Wisnu Wardana Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia 0000-0002-0768-552x Nina Wulan Sari Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia 0009-0004-8135-2450 Lapipi Lapipi Department of Economics, Faculty of Economics and Business, Haluoleo University, Kota Kendari, Indonesia 0000-0002-4066-1984 Journal Article 2022 01 11 Using a two-step system generalized method of moment (SGMM) this study explored the role of institutional quality while analyzing the links between foreign direct investment (FDI) and domestic investment (DI) in 21 Asian developing and emerging countries from 2011 to 2016. Our empirical strategy indicates that the crowds-out and crowds-in effect of FDI on domestic investment depends on the chosen dependent variable. Using domestic private investment (DPI) as the dependent variable, the study confirms the crowding-out effects of FDI on domestic investment. Conversely, utilizing the gross fixed capital formation (GFCF) findings show that the FDI crowds in the domestic investment. It is also revealed that institutional quality matters in determining such nexus. The study further recommends the need to augment the positive role of institutional quality in such a way that the crowding-out effect of the concurrent increase in FDI and institutional quality will augur well for domestic investment. Domestic Private Investment Foreign direct investment Institutional Quality Two-step System Generalized Method of Moment (SGMM) https://ier.ut.ac.ir/article_96651_6e6ace867a71d8c470d769646c179e04.pdf