Abstract
Through this research the case of Pakistan economy has been selected. The focus is on seeing the impact that government intervention in dollar stabilization leads to as far as the perceptions of investors are concerned. The perceptions of investors for this case are studied through two proxies. First being the returns on Karachi Stock Index and second being the changes in the foreign direct investment in Pakistan. The results show that dollar intervention does have a fruitful impact on the foreign investments in the country as a decline in the value of dollars sees a growth in the foreign direct investment. Overall the results show that the economy of Pakistan needs and supports the intervention by the government to take corrective actions as it is not observed to be able to correct itself through macroeconomic fundamentals.
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