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Foreign direct investment, growth and local financial markets: new evidence from Pakistan

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  • Samia Nasreen
  • Sofia Anwar

Abstract

The objective of the present study is to examine the role of local financial markets in describing the relationship between foreign direct investment (FDI) and economic growth in Pakistan. For this purpose, the study uses annual data for the period 1973-2011. Empirical analysis is based on Johansen and Juselius cointegration technique and Toda-Yamamoto causality analysis. Empirical results suggest that FDI can play a contributing role in promoting economic growth in Pakistan. However, the full benefit of FDI is reaped only if local financial markets achieve a certain minimum level of development both in the long-run and short-run. Developed financial markets allow efficient allocation of resources and enhance the absorptive capacity of a country to FDI inflows.

Suggested Citation

  • Samia Nasreen & Sofia Anwar, 2014. "Foreign direct investment, growth and local financial markets: new evidence from Pakistan," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 7(3), pages 336-348.
    • Handle: RePEc:ids:ijecbr:v:7:y:2014:i:3:p:336-348
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    Cited by:

    1. Saidi, Samir & Mani, Venkatesh & Mefteh, Haifa & Shahbaz, Muhammad & Akhtar, Pervaiz, 2020. "Dynamic linkages between transport, logistics, foreign direct Investment, and economic growth: Empirical evidence from developing countries," Transportation Research Part A: Policy and Practice, Elsevier, vol. 141(C), pages 277-293.

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