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Direct impact of inflow of foreign direct investment on poverty reduction in Pakistan: a bonds testing approach

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  • Muhammad Bilal Khan
  • Xie Huobao
  • Hummera Saleem

Abstract

This empirical study examines the relationship between foreign direct investment (FDI) and poverty reduction using some control variables in the context of Pakistan. The time-series data has been used to cover the period 1985–2016. The study found robust results of co-integration between FDI and poverty reduction in the long-run analysis. Moreover, to find the correlation between FDI and poverty reduction, this study used autoregressive distributed lag (ARDL) technique to check the co-integration between FDI and poverty. The short-run and long-run analysis results indicate that FDI, the mobile phone users (per 100 inhabitants), life expectancy, and government expenditure contributes to poverty reduction. The results of variance decomposition method showed that bidirectional causality found between FDI and poverty reduction or both are Granger cause of each other. The ratio of inflow of FDI is not too high in Pakistan, so government with scared financial resources should improve the policies regarding FDI inflow. This analysis suggests policymakers divert their attention towards the betterment of institutions, establish FDI attractive inflow trading zones like other emerging economies.

Suggested Citation

  • Muhammad Bilal Khan & Xie Huobao & Hummera Saleem, 2019. "Direct impact of inflow of foreign direct investment on poverty reduction in Pakistan: a bonds testing approach," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 3647-3666, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:3647-3666
    DOI: 10.1080/1331677X.2019.1670088
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    Cited by:

    1. Clement Olalekan Olaniyi & James Temitope Dada & Nicholas Mbaya Odhiambo & Xuan Vinh Vo, 2023. "Modelling asymmetric structure in the finance-poverty nexus: empirical insights from an emerging market economy," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(1), pages 453-487, February.

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