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Role of Stock Market Performance and Exchange Rate Volatility in the Inflow of Foreign Direct Investment: An Evidence from Pakistan

Author

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  • Rukhsana Rasheed

    (Department of Management Sciences, The Govt. Sadiq College Women University, Bahawalpur, Pakistan.)

  • Mazhir Nadeem Ishaq

    (Department of Economics, The Islamia University of Bahawalpur, Pakistan.)

  • Muhammad Fahad Malik

    (Department of Economics, The Islamia University of Bahawalpur, Pakistan.)

Abstract

The purpose of this study was to evaluate the role of macroeconomic variables i.e., stock market performance and exchange rate fluctuations on Foreign Direct Investment (FDI) for Pakistan. The required data was collected for the period of 1996 to 2020 from the World Bank and State Bank of Pakistan. In data analysis, the unit-root tests were performed to decide whether a time-series is stationary or not. An ARDL is constructed to achieve the results of this study. The results of this study provided the evidences that stock market performance and trade openness have positively and significantly linked with FDI. Whereas real GDP growth rate and exchange rates have negative effects on FDI. It is recommended that the trade policies should be devised in such a manner that these policies should promote exports. Furthermore, policies that ensure stable stock market performance could be an important factor for bringing FDI to Pakistan. However, FDI seems to be ineffective from the changes in the rate of inflation.

Suggested Citation

  • Rukhsana Rasheed & Mazhir Nadeem Ishaq & Muhammad Fahad Malik, 2022. "Role of Stock Market Performance and Exchange Rate Volatility in the Inflow of Foreign Direct Investment: An Evidence from Pakistan," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 4(1), pages 77-83, March.
    • Handle: RePEc:ani:irdjom:v:4:y:2022:i:1:p:77-83
    DOI: 10.52131/jom.2022.0401.0063
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    References listed on IDEAS

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    1. AKBAR Minhas & AKBAR Ahsan, 2015. "An Empirical Analysis Of Foreign Direct Investment In Pakistan," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 10(1), pages 5-15, April.
    2. Sundas Rauf & Rashid Mehmood & Aisha Rauf & Shafaqat Mehmood, 2016. "Integrated Model to Measure the Impact of Terrorism and Political Stability on FDI Inflows: Empirical Study of Pakistan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 1-7, April.
    3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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