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Determinants of Inflow of Foreign Direct Investment (FDI) into Pakistan

Author

Listed:
  • Ahmed, Tehseen
  • Malik, Saif Ullah

Abstract

The objective of this research paper is to examine the effects of various factors like violence, stock exchange performance and exchange rate on Foreign Direct Investment (FDI) inflow into Pakistan. For econometric analysis monthly secondary data ranging from 2003 to 2011 has been used. Regression and correlation are used as analytical tools for the empirical estimation. In addition, for time series data analysis Augmented Dickey Fuller test and Phillips-Perron test have been used. This study finds that the violence in the country and Karachi Stock Exchange- 100 Index are statistically significant factors with a positive sign. Moreover, the exchange rate has also been found to be statistically significant factor with negative sign. This study uses monthly time series data from 2003-2001, which enables a deeper understanding of FDI inflow in Pakistan. Results suggest that in order to enhance FDI inflow to a desirable level, the government should ensure the existence of a peaceful environment, efficient capital markets and a stable exchange rate in the country.

Suggested Citation

  • Ahmed, Tehseen & Malik, Saif Ullah, 2012. "Determinants of Inflow of Foreign Direct Investment (FDI) into Pakistan," MPRA Paper 54737, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54737
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    File URL: https://mpra.ub.uni-muenchen.de/54737/1/MPRA_paper_54737.pdf
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    References listed on IDEAS

    as
    1. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
    2. Kolstad, Ivar & Villanger, Espen, 2008. "Determinants of foreign direct investment in services," European Journal of Political Economy, Elsevier, vol. 24(2), pages 518-533, June.
    3. Adam, Anokye M. & Tweneboah, George, 2008. "Foreign Direct Investment and Stock market Development: Ghana’s Evidence," MPRA Paper 11985, University Library of Munich, Germany, revised 2008.
    4. Zafar Mueen Nasir & Arshad Hassan, 2011. "Economic Freedom, Exchange Rates Stability and FDI in South Asia," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 423-433.
    5. Iqbal, Javed, 2008. "Stock Market in Pakistan: An Overview," MPRA Paper 11868, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Foreign Direct Investment (FDI) inflow; Exchange Rate; Violence; Karachi Stock Exchange (KSE);

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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