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Inward foreign direct investment and aggregate imports: time series evidence from Pakistan

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  • Abdul, waheed
  • Syed tehseen, jawaid

Abstract

This study investigates the impact of inward foreign direct investment (FDI) on aggregate imports in Pakistan using the annual time series data for the period 1981 to 2007. The cointegration results suggest that there exists a unique significant positive long-run equilibrium relationship between inward FDI and aggregate imports in Pakistan. The respective parsimonious short-term dynamic error-correction model also confirms a significant positive short run relationship with high speed of adjustment. The causality result shows unidirectional causality running from inward FDI to aggregate imports in the country. The sensitivity analysis confirms that the results are robust.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31270.

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Date of creation: 06 Jan 2010
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Handle: RePEc:pra:mprapa:31270

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Keywords: Inward FDI; Imports; Cointegration; Causality;

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  1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  2. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  3. Sarmad, Khwaja, 1989. "The determinants of import demand in Pakistan," World Development, Elsevier, vol. 17(10), pages 1619-1625, October.
  4. V N Balasubramanyam & M Salisu & David Sapsford., . "Foreign Direct Investment and Growth in EP and IS Countries," Working Papers ec18/94, Department of Economics, University of Lancaster.
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  14. M. T. Alguacil & V. Orts, 2003. "Inward Foreign Direct Investment and Imports in Spain," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 19-38.
  15. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  16. Zeshan Atique & Mohsin Hasnain Ahmad & Usman Azhar, 2004. "The Impact of FDI on Economic Growth under Foreign Trade Regimes: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 707-718.
  17. Mohsin S. Khan, 1974. "Import and Export Demand in Developing Countries (Demande à l'importation et l'exportation dans les pays en développement) (La demanda de importación y de exportación en los países en des," IMF Staff Papers, Palgrave Macmillan, vol. 21(3), pages 678-693, November.
  18. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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