Developing economies often impose restrictions on foreign direct investment
(FDI). In recent years many developing economies liberalize external trade
as well as FDI inflows. The economists have neglected the importance of go
vernment policies on economic performance until recently. This paper makes
use of the panel data from different economies in order to provide a cleare
r picture on the FDI inflows. The results confirm that the governments are
successful in absorbing foreign capital inflows through more liberal polici
es.