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Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan

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  • Siddiqui, Rizwana
  • Kemal, A.R.

Abstract

Foreign capital inflows (FKI) help an economy by financing the imbalance between income and expenditure. However, their impact on poverty in the recipient economy is a controversial issue. In this study, a static computable general equilibrium (CGE) model for Pakistan has been used to assess the impact of foreign capital on poverty. Several interesting results emerged from the study. FKI increase demand for goods for investment purposes that lead to the expansion of import-competing- sector machinery to fulfil domestic demand. However, the contraction of the majority of trading sectors combined with expansion of non-trading sectors of the economy have generated ‘Dutch disease effect’. The results show that FKIs have a positive impact on poverty in Pakistan. Trade liberalization of import of machinery reduces the negative effect of the decline in FKI. Rise in poverty in Pakistan may be attributed to the decline in foreign capital.

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  • Siddiqui, Rizwana & Kemal, A.R., 2019. "Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan," MPRA Paper 99013, University Library of Munich, Germany, revised Jul 2019.
    • Handle: RePEc:pra:mprapa:99013
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    Cited by:

    1. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    2. Fazal Husain & Abdul Qayyum, 2006. "Stock Market Liberalisations in the South Asian Region," PIDE-Working Papers 2006:6, Pakistan Institute of Development Economics.
    3. Muhammad Arshad Khan, 2007. "Foreign Direct Investment and Economic Growth: The Role of Domestic Financial Sector," PIDE-Working Papers 2007:18, Pakistan Institute of Development Economics.
    4. Rizwana Siddiqui & A. R. Kemal, 2006. "Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan," PIDE-Working Papers 2006:2, Pakistan Institute of Development Economics.
    5. M. Tahir Suleman & M. Talha Amin, 2015. "The Impact of Sectoral Foreign Direct Investment on Industrial Economic Growth of Pakistan," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 2(1), pages 102-123, March.
    6. Siddiqui, Rizwana, 2004. "Salient Features of the Financial Social Accounting Matrix for Pakistan-1989-90," MPRA Paper 96472, University Library of Munich, Germany, revised 2019.
    7. Rizwana Siddiqui & A. R. Kemal, 2006. "Remittances, Trade Liberalisation, and Poverty in Pakistan: The Role of Excluded Variables in Poverty Change Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(3), pages 383-415.
    8. Faiz Bilquees, 2006. "Civil Servants’ Salary Structure," Microeconomics Working Papers 22185, East Asian Bureau of Economic Research.
    9. Zaman, Khalid & Khan, Muhammad Mushtaq & Ahmad, Mehboob, 2012. "The relationship between foreign direct investment and pro-poor growth policies in Pakistan: The new interface," Economic Modelling, Elsevier, vol. 29(4), pages 1220-1227.
    10. Paul Dorosh & Abdul Salam, 2008. "Wheat Markets and Price Stabilisation in Pakistan: An Analysis of Policy Options," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(1), pages 71-87.
    11. Mughal, Mazhar, 2008. "Boon or bane- role of FDI in the economic growth of Pakistan," MPRA Paper 16468, University Library of Munich, Germany.
    12. Abdul Qayyum & A. R. Kemal, 2006. "Volatility Spillover between the Stock Market and the Foreign Market in Pakistan," PIDE-Working Papers 2006:7, Pakistan Institute of Development Economics.
    13. Asmat Ullah & Syed Waqar Hussain & Zahoor Khan, 2012. "Micro-econometric Analysis of Impact of Remittances on Household’s Welfare: Empirical Evidence from District Peshawar," Oeconomics of Knowledge, Saphira Publishing House, vol. 4(1), pages 2-13, January.
    14. Ali Cheema & Asad Sayeed, 2006. "Bureaucracy and Pro-poor Change," Governance Working Papers 22186, East Asian Bureau of Economic Research.
    15. Rizwana Siddiqui, 2004. "Modelling Gender Dimensions of the Impact of Economic Reforms on Time Allocation among Market Work,Household Work, and Leisure," PIDE-Working Papers 2004:185, Pakistan Institute of Development Economics.
    16. Ahsen Mukhtar & Muhammad Asif & Ghamz-e-Ali Siyal & Khalid Zaman, 2014. "Institutional-Macroeconomic Nexus: Inducement on Foreign Direct Investment (FDI) in Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(11), pages 465-479, November.
    17. Hummera Saleem & Malik Shahzad Shabbir & Syed Ali Raza Shah & Jalal Shah, 2021. "Nexus between Foreign Direct Investment and Poverty Reduction: A case of Pakistans," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(3), pages 272-280, December.
    18. Khan, Muhammad Aamir, 2017. "Regional Trade and Economic Development: Options for Pakistan," Conference papers 332899, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    FKI; Poverty; CGE model;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F2 - International Economics - - International Factor Movements and International Business
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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