Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis
AbstractThis paper establishes an empirical relationship between industry -specific foreign direct investment (FDI) and output under the framework of Granger causality and panel cointegration for Pakistan over the period 1981-2008. The result supports th e evidence of panel cointegration between FDI and output. FDI has a positive effect on output in the long run. The result also supports the evidence of long-run causality running from GDP to FDI, while in the short run, the evidence of two-way causality between FDI and GDP is identified. At the sectoral level, the effects of FDI on growth vary significantly across sectors. The most striking result obtained is that FDI causes growth in the primary and services sectors, while growth causes FDI in the manufacturing sector.
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Bibliographic InfoPaper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2011:67.
Length: 22 pages
Date of creation: 2011
Date of revision:
FDI; Growth; Cointegration; Causality;
Other versions of this item:
- Muhammad Arshad Khan & Shujaat Ali Khan, 2012. "Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis," Working Papers id:4683, eSocialSciences.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-DEV-2011-05-14 (Development)
- NEP-FDG-2011-05-14 (Financial Development & Growth)
- NEP-INT-2011-05-14 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-71, May.
- Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
- Raza, Syed Ali & Sabir, Muhammad Sarwar & Mehboob, Farhan, 2011. "Capital inflows and economic growth in Pakistan," MPRA Paper 36790, University Library of Munich, Germany.
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