IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2020-05-38.html
   My bibliography  Save this article

Domestic Investment in Pakistan: An Analysis Across Different Political Regimes

Author

Listed:
  • Muhammad Shabbir

    (Department of Economics, University of Kotli Azad Jammu and Kashmir, Pakistan,)

  • Imrab Shaheen

    (Department of Public Administration, University of Kotli Azad Jammu and Kashmir, Pakistan)

  • Fahrat Qayyum

    (Department of Public Administration, University of Kotli Azad Jammu and Kashmir, Pakistan)

Abstract

This study has been conducted to find out the impact of political and economic variables on domestic investment of Pakistan. For this purpose secondary data for 35 years has been collected according to the variables of this study. To analyze the data ARDL bound test procedure has been applied to assess long run relationshipand ARDL based ECM applied to check short run associationof political and economic variables on domestic investment whereas augmented dickey fuller test is applied to check stationary of data. Our findings declared that gross domestic product, foreign direct investment, foreign debt and domestic credit to private sector positively affect domestic investment in Pakistan whereas interest rate, foreign aid, inflation and non-democratic government have negative relation with domestic investment in long run. Dictatorial dummy and credit to private sector has insignificant influence in long run whereas in short run, non democratic dummy influences domestic investment significantly. Results are accordant with classical and Keynesian views. Overall it is concluded that domestic investment decisions have no concern to regime type but political and economic stability and law and order conditions are necessary to promote domestic investment.

Suggested Citation

  • Muhammad Shabbir & Imrab Shaheen & Fahrat Qayyum, 2020. "Domestic Investment in Pakistan: An Analysis Across Different Political Regimes," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 344-351.
    • Handle: RePEc:eco:journ1:2020-05-38
    as

    Download full text from publisher

    File URL: https://econjournals.com/index.php/ijefi/article/download/10444/pdf
    Download Restriction: no
    File URL: https://econjournals.com/index.php/ijefi/article/view/10444/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nasir Iqbal & Saima Nawaz, 2009. "Investment, Inflation and Economic Growth Nexus," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 48(4), pages 863-874.
    2. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
    3. Mohsin Hasnain Ahmad & Qazi Masood Ahmed, 2002. "Foreign Capital Inflows and Domestic Savings in Pakistan: Cointegration Techniques and Error Correction Modelling," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(4), pages 825-836.
    4. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    6. Khan, Safdar Ullah & Saqib, Omar Farooq, 2011. "Political instability and inflation in Pakistan," Journal of Asian Economics, Elsevier, vol. 22(6), pages 540-549.
    7. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2011. "Consequences of Political Instability, Governance and Bureaucratic Corruption on Inflation and Growth: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 773-807.
    8. Kalim Hyder & Qazi Masood Ahmed, 2004. "Why Private Investment In Pakistan Has Collapsed And How It Can Be Restored," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(1), pages 107-125, Jan-June.
    9. Abdul Waheed, 2015. "Determinants of Domestic Private Investment: Test of Alternative Hypotheses for Pakistan," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 4(2), pages 35-43, April.
    10. Maryam Bint-e-Ajaz & Nazima Ellahi, 2012. "Public-Private Investment and Economic Growth in Pakistan: An Empirical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 61-78.
    11. Morrissey, Oliver & Udomkerdmongkol, Manop, 2012. "Governance, Private Investment and Foreign Direct Investment in Developing Countries," World Development, Elsevier, vol. 40(3), pages 437-445.
    12. Hasanat Shah, Syed & He, Bin & Li, Junjiang, 2011. "The Causality and Economic Impact of FDI inflows from Trade Partners in Pakistan," MPRA Paper 35645, University Library of Munich, Germany.
    13. Marius Cristea & Stefana A. D. Varvari & József Benedek, 2012. "Pros and cons of foreign direct investments on local economy," Eszak-magyarorszagi Strategiai Fuzetek, Faculty of Economics, University of Miskolc, vol. 9(2), pages 20-34.
    14. Munyambonera Ezra Francis & Faizal Buyinza, 2013. "Behavior and Determinants of Private Investment in Uganda," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 1(3), pages 75-95.
    15. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    16. Ahmad, Imtiaz & Qayyum, Abdul, 2008. "Effect of Government Spending and Macro-Economic Uncertainty on Private Investment in Services Sector: Evidence from Pakistan," MPRA Paper 11673, University Library of Munich, Germany.
    17. Margarita Kalamova & Nick Johnstone, 2012. "Environmental Policy Stringency and Foreign Direct Investment," Chapters, in: Frank Wijen & Kees Zoeteman & Jan Pieters & Paul van Seters (ed.), A Handbook of Globalisation and Environmental Policy, Second Edition, chapter 2, Edward Elgar Publishing.
    18. Iqbal, Nasir & Khan, Sardar Javaid Iqbal & Irfan, Muhammad, 2008. "Democracy, Autocracy and Macroeconomic Performance in Pakistan," MPRA Paper 28122, University Library of Munich, Germany.
    19. Muhammad Arshad Khan & Ayaz Ahmed, 2007. "Foreign Aid-Blessing or Curse: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(3), pages 215-240.
    20. Jai S. Mah, 2012. "Foreign direct investment, labour unionization and income inequality of Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 19(15), pages 1521-1524, October.
    21. Manuel Pastor & Jae Ho Sung, 1995. "Private Investment and Democracy in the Developing World," Journal of Economic Issues, Taylor & Francis Journals, vol. 29(1), pages 223-243, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Sultan, Zafar Ahmad & Ahmad, Nawaz, 2017. "Trade Openness and Employment Nexus in Saudi Arabia," MPRA Paper 109451, University Library of Munich, Germany.
    2. Mahmood, Haider & Alkhateeb, Tarek Tawfik Yousef & Ahmed, Nawaz, 2017. "Impact of devaluation on Saudi oil exports: The J-Curve analysis," MPRA Paper 109454, University Library of Munich, Germany.
    3. Mahmood, Haider, 2018. "An Investigation Of Macroeconomic Determinants Of Fdi Inflows In Bangladesh," MPRA Paper 109144, University Library of Munich, Germany.
    4. Mahmood, Haider, 2016. "Testing Fiscal Sustainability under the Inter-Temporal Budget Constraint in Saudi Arabia," MPRA Paper 109458, University Library of Munich, Germany.
    5. Mahmood, Haider & Chaudhary, A. R., 2013. "Impact of FDI on Income Inequality in Pakistan," MPRA Paper 109460, University Library of Munich, Germany.
    6. Alkhateeb, Tarek Tawfik Yousef & Alkahtani, Nasser Saad & Mahmood, Haider, 2017. "Assessing the Role of Foreign Labour on Saudi Labour Unemployment in Saudi Arabia," MPRA Paper 109449, University Library of Munich, Germany.
    7. Chen, George S. & Yao, Yao & Malizard, Julien, 2017. "Does foreign direct investment crowd in or crowd out private domestic investment in China? The effect of entry mode," Economic Modelling, Elsevier, vol. 61(C), pages 409-419.
    8. Mahmood, Haider & Alkhateeb, Tarek Tawfik, 2017. "An Estimation of Service Quality in King Khalid Hospital, Saudi Arabia," MPRA Paper 109453, University Library of Munich, Germany.
    9. Shah, Syed Hasanat & Hasnat, Hafsa & Cottrell, Simon & Ahmad, Mohsin Hasnain, 2020. "Sectoral FDI inflows and domestic investments in Pakistan," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 96-111.
    10. Md. Monirul Islam & Mohammad Tareque & Abu N. M. Wahid & Md. Mahmudul Alam & Kazi Sohag, 2022. "Do the Inward and Outward Foreign Direct Investments Spur Domestic Investment in Bangladesh? A Counterfactual Analysis," JRFM, MDPI, vol. 15(12), pages 1-22, December.
    11. Mahmood, Haider & Alkhateeb, Tarek Tawfik Yousef & Ahmed, Nawaz, 2017. "Impact of Devaluation on Industrial Exports in Saudi Arabia: J-Curve Hypothesis," MPRA Paper 109455, University Library of Munich, Germany.
    12. Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.
    13. Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Sultan, Zafar Ahmad & Ahmad, Nawaz, 2017. "Financial Market Development and Employment Nexus in Saudi Arabia," MPRA Paper 109450, University Library of Munich, Germany.
    14. Lim, Jamus Jerome, 2014. "Institutional and structural determinants of investment worldwide," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 160-177.
    15. Iwegbu, Onyebuchi & Nwaogwugwu, Isaac Chiawolam, 2019. "Effect of Exchange Rate Shock on Key Sectors of the Nigerian Economy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 507-533.
    16. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    17. Cristina Jude, 2019. "Does FDI crowd out domestic investment in transition countries?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 27(1), pages 163-200, January.
    18. Tang, Sam Hak Kan & Yung, Linda Chor Wing, 2008. "Does rapid economic growth enhance democratization? Time-series evidence from high performing Asian economies," Journal of Asian Economics, Elsevier, vol. 19(3), pages 244-253, June.
    19. Hayat, Zafar & Balli, Faruk & Rehman, Muhammad, 2018. "Does inflation bias stabilize real growth? Evidence from Pakistan," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1083-1103.
    20. Askandarou Diallo, & Jacolin Luc, & Isabelle Rabaud., 2021. "Foreign Direct Investment and Domestic Private Investment in Sub-Saharan African Countries: Crowding-In or Out ?," Working papers 816, Banque de France.

    More about this item

    Keywords

    Political Regime; Gross Domestic Product; Foreign Debt; Domestic nvestment; Interest rate;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • A3 - General Economics and Teaching - - Multisubject Collective Works
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2020-05-38. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.