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Foreign direct investment, cost of war and trade in Pakistan

  • Syed, Hasanat Shah
  • Hasnat, Hafsa
  • Li, Junjian
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    This paper uses macro panel data and gravity model to examine the impact of FDI (Foreign Direct Investment) inflows from 20 trade partners and increasing war cost in Pakistan on import, export and trade deficit. The paper compares the effect and inflows of FDI in Pakistan before and after joining the war on terror in 2001. This research work confirms the complementary relationship between FDI and export and FDI and imports, however, the results of FDI impact on trade deficit is insignificant. Similarly, the impact of war cost on exports, imports and trade deficit is not significant.

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    File URL: http://mpra.ub.uni-muenchen.de/35598/1/MPRA_paper_35598.pdf
    File Function: original version
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35598.

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    Date of creation: Jun 2011
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    Handle: RePEc:pra:mprapa:35598
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    1. Mark L. J. Wright, 2004. "New Empirical Results on Default: A Discussion of "A Gravity Model of Sovereign Lending: Trade, Default and Credit"," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 64-74, June.
    2. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
    3. Serven, Luis & Solimano, Andres, 1992. "Private Investment and Macroeconomic Adjustment: A Survey," World Bank Research Observer, World Bank Group, vol. 7(1), pages 95-114, January.
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    5. Nitsch, Volker & Schumacher, Dieter, 2004. "Terrorism and international trade: an empirical investigation," European Journal of Political Economy, Elsevier, vol. 20(2), pages 423-433, June.
    6. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
    7. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
    8. repec:sae:niesru:v:149:y::i:1:p:30-52 is not listed on IDEAS
    9. Zwinkels, Remco C.J. & Beugelsdijk, Sjoerd, 2010. "Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?," International Business Review, Elsevier, vol. 19(1), pages 102-115, February.
    10. Luiz R. De Mello & Kiichiro Fukasaku, 2000. "Trade and foreign direct investment in Latin America and Southeast Asia: temporal causality analysis," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(7), pages 903-924.
    11. Petri, Peter A., 1992. "Platforms in the Pacific: the trade effects of direct investment in Thailand," Journal of Asian Economics, Elsevier, vol. 3(2), pages 173-196.
    12. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
    13. Stevens, Guy V. G., 2000. "Politics, economics and investment:: Explaining plant and equipment spending by US direct investors in Argentina, Brazil and Mexico," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 153-183, April.
    14. Lipsey, Robert E & Weiss, Merle Yahr, 1984. "Foreign Production and Exports of Individual Firms," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 304-08, May.
    15. Nigel Driffield & James H Love, 2007. "Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 38(3), pages 460-473, May.
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