Foreign Direct Investment In Pakistan Research Articles

The Impact of Institutional Performance and Environmental Sustainability on Foreign Direct Investment in Pakistan

In the context of Pakistan, this study aims to investigate how environmental sustainability, institutional performance, financial inclusion, and economic growth interact with and affect foreign direct investment .to determine if there are substantial causal linkages or correlations between these factors, as well as how these independent variables affect FDI inflows and outflows in Pakistan. The study also intends to offer insights on how individuals and governments may support FDI in the Pakistani setting. The research uses time-series data collected from 1997 to 2022 from the (ICRG) and (WDI) .It uses NARDL modelling to analyses the dynamic relationships between FDI, environmental sustainability, institutional performance, financial inclusion, and economic growth in the context of Pakistan. Unit root tests are used to evaluate each factor's stationarity. It seeks to clarify the short- and long-term correlations between these factors by doing this. The NARDL approach reveals substantial discrepancies in the connection among independent variables and foreign direct investment. The study finds connections between FDI and the selected independent variables that are both short- and long-term with positive and negative shocks. Foreign direct investment (FDI) benefits from institutional performance and economic development in both the short and long run, although it is less immediately influenced by financial inclusion and environmental sustainability. This highlights not just the need for more research to explore the collateral advantages of sustainability and financial inclusion, but also the necessity of supporting institutions and economic growth to attract foreign direct investment. To attract more foreign direct investment, Pakistan may really promote measures that support economic growth and institutional effectiveness. This adds to the body of scholarly research and offers useful advice to stakeholders and policymakers who want to maximize FDI inflows while fostering inclusive and sustainable economic growth in Pakistan.

The Dynamic Relationship between Political Instability, FDI, and Economic Growth in Pakistan: A Time-Series Study

This study analyzes the relationship between economic growth, corruption, terrorism, rule of law, and foreign direct investment in Pakistan using time series data for the period of 2000-2020. In order to examine the correlation between these variables, the research utilizes various methods such as descriptive statistics, unit-root tests, auto-regressive tests, and a GARCH (1,1) model which includes explanatory variables in the mean equation. The results indicate that rule of law and foreign direct investment have a positive and significant impact. The study suggests that institutional quality plays a vital role in promoting economic development. However, the presence of ARCH effects indicates that the model may not be the best fit for the data, and further research is needed to improve the model's performance. Further research is needed to gain a more complete understanding of the complex relationships among various factors affecting economic growth. In general, this research adds to the existing body of literature regarding the correlation between institutional quality and economic growth. It underscores the significance of sound governance and robust institutions in promoting economic development, with a particular focus on Pakistan. The study emphasizes the vital role that good governance and strong institutions play in fostering economic growth.

Analyzing the Influence of Exchange Rate Dynamics on Foreign Direct Investment in Pakistan: A 13-Year Analysis

Background: In the economic development of Pakistan, Foreign Direct Investment (FDI) plays a crucial role while the exchange rate has been determined as an important factor influencing the FDI inflows. Research Aim: This research paper explores the multifaceted relationship between changes in exchange rate and Foreign Direct Investment (FDI) in Pakistan aiming to shed the light on complex dynamics at play. Methodology: Through the data analysis from 2010 to 2022 and empirical studies this study identifies a significant relationship between the change in exchange rate and FDI. The test of Linear Regression and Pearson’s Correlation were applied to test the data through SPSS software. Results: The results of the correlation exhibited that there is a positive relationship between change in Exchange rate and FDI, while the R-square in the regression analysis showed about 58.1% impact of the independent variable on the dependent variable. It is apparent from the study that the depreciation and appreciation of the Pakistani currency relative to major international currencies affects the decision of the investors. Conclusion: This paper concludes with a set of recommendations for the Government of Pakistan with the aim of creating a conducive environment for Foreign Direct Investment (FDI) by considering stabilizing the exchange rate as a key factor. Further, this research will help provide valuable insight and pathways for the policymakers and investors in forming the decision-making and policy for the development and sustainable growth of the economy of Pakistan.

Greening Growth: The Environmental Implications of Technology Innovation, Green Finance, and Foreign Direct Investment in Pakistan

This research delves deeply into the intricate interplay among technology innovation, green finance, foreign direct investment (FDI), GDP, and their collective impact on the environment. Employing the Autoregressive Distributed Lag (ARDL) model over the timeframe spanning 1990 to 2021, the study aims to unveil nuanced insights into the intricate relationships that shape the environmental landscape. The study's findings offer an insightful perspective on the connections between these pivotal variables and their repercussions on environmental metrics. Specifically, the outcomes reveal a negative correlation between technology innovation, green finance, and CO2 emissions, as well as ecological footprints. This suggests a noteworthy linkage between technological advancements and the adoption of sustainable financial mechanisms with reduced carbon emissions and a less burdensome ecological footprint. These trends underline their potential to contribute positively to the well-being of the environment. In contrast, the study uncovers a positive correlation between FDI, GDP, and both CO2 emissions and ecological footprints. This observation underscores the intricate dynamics at play, wherein foreign direct investment and economic growth appear to exert pressures that escalate carbon emissions and environmental impact. This intricate relationship brings into focus the potential trade-offs between advancing economic development and preserving the environment, necessitating a thoughtful equilibrium for sustainable progress. The implications of these revelations hold substantial weight for policymakers and government officials in Pakistan. By illuminating the nuanced interconnections among technology innovation, green finance, FDI, and environmental indicators, this research equips decision-makers with invaluable insights to formulate effective policies.

Assessing the Environmental Consequences of Financial Development, Technology Innovation, and Foreign Direct Investment in Pakistan

The current article scrutinizes the interplay amid financial development, technological innovation, foreign direct investment (FDI), GDP growth, and their collective impact on the environment within the context of Pakistan. Employing the Autoregressive Distributed Lag (ARDL) methodology, the study spans the time frame of 1990 to 2021. Notably, the research simultaneously employs three distinct proxies for measuring financial development and uncovers a consistent negative correlation between each proxy and environment. Moreover, the findings underscore the adverse environmental repercussions of foreign direct investment and economic expansion. In contrast, the influence of technological innovation exhibits a contrasting trend, displaying a negative relationship with environmental degradation. This study contributes to a nuanced understanding of the intricate relationships between economic factors and environmental health in Pakistan, offering insights that could inform future policy decisions in pursuit of sustainable development.

Investigating the Impact of Economic Freedom on Foreign Direct Investment in Pakistan

Investigating the Impact of Economic Freedom on Foreign Direct Investment in Pakistan

The Impact of Institutional Quality on Sectoral Foreign Direct Investment in Pakistan: A Dynamic Simulated ARDL Approach

Capital is needed to accelerate the development process, but developing nations struggle with minimum resources. Since foreign direct investment (FDI) is essential to solve the funding shortage, developing nations make every effort to attract FDI to their countries. This study was conducted to explore the impact of institutional quality on sectoral FDI in Pakistan using time series data for the period from 1986 to 2019. To create a solid foundation for policy formulation, this study developed a single measure of institutional quality by utilizing a wide range of institutional indicators. It evaluates the impact of overall institution quality on sector-level FDI and examines the causal relationship between institutions and sectoral FDI with a clear focus on a single-country analysis. The dynamic simulated autoregressive distributed lag technique was employed to explore the impact of institutional quality and other factors on FDI. The results of the study explained that institutional quality and TO have a positive and significant effect on the FDI of the primary FDI sector at 5%, while in the case of the secondary sector, the effect of institutional quality, HDI and GDP on FDI inflow is significant at 10% and TO has a significant effect on secondary sector FDI at 5%. In addition, institutional quality and GDP have a positive relationship with tertiary sector FDI at 5%. The empirical findings show that higher institutional quality in emerging economies such as Pakistan encourages large transfers of technological advances through FDI, increasing the overall performance of the economy. This study found that institutional quality significantly increases sectoral FDI in Pakistan. Finally, this study prescribes some policy measures to increase FDI based on the findings.

The Importance of Renewable Energy Consumption and Human Capital in Attracting Foreign Direct Investment in Pakistan

This research looks at the connections between FDI, renewable and nonrenewable energy, human capital, and the environment in Pakistan. Using data collected from 1998 to 2020, this study uses the autoregressive distributed lag (ARDL) method to quantify the interdependencies between various conceptual frameworks. All variables tested had a significant impact on FDI in the long run. The environment coefficient is significantly negative. In addition, there is a positive indication of significance for the coefficients of renewable energy, non-renewable energy, and human capital acquired through formal education. Based on the findings of this research, it is recommended that national governments take steps to attract more FDI.

Governance as a Stimulator for Foreign Direct Investment in Pakistan: A Non-Linear ARDL Approach

Governance as a Stimulator for Foreign Direct Investment in Pakistan: A Non-Linear ARDL Approach

Does Sustainable Development Promote Foreign Direct Investment in Pakistan? An ARDL Analysis

Foreign direct investment (FDI) has become a cornerstone for the public and private sectors, especially in developing countries as it can enhance social overhead capital and employment opportunities. This study examines the association between sustainable development and foreign direct investment in Pakistan over the period 1972-2021 by using the ARDL estimation technique. The study has used various variables i.e., foreign direct investment, sustainable development index, tax, exchange rate, credit, broad money and trade. The findings reveal that exchange rate, credit, broad money and trade are positively related to foreign direct investment while the tax has a negative effect on FDI. The study also points out that there is a long-run association between sustainable development and FDI. The study recommends that policymakers may enhance foreign direct investment through sustainable development, taxes reduction, financial development, exchange rate stability and trade in Pakistan.

Economic Determinants of Foreign Direct Investment in Pakistan

Pakistan aims to increase the ratio of GDP to investment by attracting foreign direct investment (FDI). Foreign investors, mostly from developed dynamic centers, are enhancing international production by investing in resource-rich economies. By taking an overview of cross-border investment inflows, this paper attempted to empirically investigate the determinants of foreign direct investment in Pakistan. The analysis allowed us to identify some economic determinants of FDI in Pakistan, such as the GDP growth rate, the volume of exports, the human population, import duties, and the price index. The volume of exports has become the most powerful determinant of FDI. The government must make a paradigm shift in its investment policy to attract FDI. It should focus on export-oriented industries instead of promoting FDI for domestic consumption.

Prospects of Cross Border Energy Trade in South Asia

The majority of South Asian nations use a combination of renewable energy sources like hydro, solar, and wind power together with nonrenewable energy sources like nuclear, coal, and natural gas to generate their electricity. Both of these sources are indigenous to some degree. Every nation in the area benefits from one type of resource or another. In India, coal is available. Natural gas is also abundant in Bangladesh, Pakistan, Nepal, and Bhutan, as well as hydropower. Using panel data from 2001 to 2015, this study examines the relationship between electricity consumption and changes in income, population, and foreign direct investment in Pakistan, India, Bangladesh, Sri Lanka, and Nepal, five South Asian nations. Additionally, the demand for electricity can be satisfied by imports or electrical production. The OLS results confirm that there is significant relationship between electricity consumption and GDP in South Asia. The OLS result further suggests that there is significant positive relation between GDP and electricity imports for India and Pakistan where as Nepal and Bangladesh have significant positive relation between GDP and electricity production. It is therefore concluded that there is a huge potential of cross border energy trade in South Asia and enhance economic growth in the region.

Role of Governance, Trade, and Tourism in Foreign Direct Investment in Pakistan

The Primal objective of this research is to reveal the role of governance, tourism, and trade in the stimulation of FDI inflows in Pakistan. These forces have been integrated for empirical methodology after a detailed examination of past studies. The study took data set for selected variables from World Development Indicators (WDI) and World governance indicators (WGI) for the past two decades (2000-2021). Except for governance, tourism, and trade, this research incorporates macroeconomic stability and financial development as the stimulators of FDI inflows in Pakistan. In statistical data estimation, after using the ADF test, the ARDL technique is applied based on the variable's cointegration order. Both short and long-run estimates of ARDL confirmed the statistical significance of all studied variables that are governance (GOVEF), tourism (LTRSM), trade (TD), gross savings (GS), and broad money (BM). Bound test and CUSUM disclosed that there is long-run cointegration and the examined model is statistically significant and stable. Overall findings disclosed that GOVEF and trade are positively correlated, while LTRSM confirmed a negative association with FDI inflows for the case of Pakistan.

Green Investment for Sustainable Business Development: The Influence of Policy Instruments on Solar Technology Adoption

Green investment in sustainable energy can overcome the dependence on fossil fuels worldwide. Renewable energy policies have become the key issue in both developing and developed countries; there is a need to focus on energy-related policies by regulatory authorities of these countries. The current study critically analyzes the performance of the existing renewable energy policy instruments to attract foreign direct investment (FDI) for solar energy development in Pakistan. We evaluate the moderating role of good governance and financial support between the nexus of renewable energy policy instruments and green FDI for the sustainable development of solar energy in the country. The present study used non-probability (purposive) sampling to collect data from 43 respondents (private investors, government officials, energy experts, and policymakers) by conveying an energy policy-related questionnaire survey. The response rate was 82.69%. The study has used partial least squares structural equation modeling to assess formulated hypotheses. The results indicate that the feed-in tariffs is the most effective policy instrument to attract FDI in the country’s solar energy sector. The fiscal measures positively impact the green FDI for solar energy. The results further reveal that good governance and financial support positively and significantly moderate the nexus of renewable energy policy instruments and green FDI for solar energy. The main barriers have been identified over the whole solar energy spectrum. The study findings provide essential policy recommendations and a considerable manual for energy-related regulators, policymakers, and government institutions to adopt advanced renewable energy policy instruments to attract FDI in Pakistan.

Empirical nexus between Chinese investment under China–Pakistan Economic Corridor and economic growth: An ARDL approach

This study examines the causality between Chinese Investment under China–Pakistan Economic Corridor and economic growth in Pakistan by using the Autoregressive distributed lag estimation framework. For this purpose, quarterly time series data ranging from 2009 to 2018 were used. In short run, results failed to establish causality from Chinese Foreign Direct Investment to Economic Growth, while a unidirectional causality was found from economic growth to Chinese Foreign Direct Investment. However, results of this study confirm that the variables of interest are bound together in the long run only when Chinese Foreign Direct Investment is the dependent variable, indicating that enhanced economic growth attracts more Foreign Direct Investment in Pakistan. Results of this study have important implications for economists and policymakers to make policies alongside China Pakistan Economic Corridor in order to ensure that the potential spillovers from the inflow of Chinese Foreign Direct Investment in the shape of China Pakistan Economic Corridor infrastructure projects create domestic spillover. Moreover, the insignificant effect of Chinese Foreign Direct Investment on the economic growth of Pakistan in the short run is due to the real challenges that Pakistan faces due to access to credit and state capacity to sustain economic growth. Therefore, it is recommended that government should formulate policies for technologically demanding sectors to bring diversity in the products and increase exports.

A validity of environmental Kuznets curve under the role of urbanization, financial development index and foreign direct investment in Pakistan

PurposeThis research aims to inspect the existence of the “environmental Kuznets curve” (EKC) in the presence of foreign direct investment (FDI), financial development (FD) and urbanization throughout 1972–2018 for Pakistan.Design/methodology/approachFor time series analysis, Phillips and Perron (PP) and Augmented Dickey–Fuller (ADF) unit root tests are used to confirm the level of integration. For robustness, Kim and Perron (2009)’s structural break unit root test is employed, which identifies the order of integration in the presence of structural break years. Further, combined cointegration analysis is performed to confirm the existence of a long-run association between underlying variables. Furthermore, autoregressive distributed lag (ARDL) analysis is employed for the robustness of the cointegration approach.FindingsThe cointegration analysis confirms the existence of a long-run association among variables. The authors find a positive and significant impact of urbanization, FD and foreign development on environmental degradation in the long run. Similarly, only FDI increases environmental degradation in the short run. In addition, the authors find an inverted U-shape relationship between economic growth and environmental quality which, further, confirms the presence of EKC in Pakistan.Originality/valueThis research contributes to applied economics in many ways: the combined effect of urbanization, FD, FDI and economic growth on carbon dioxide (CO2) emission is checked simultaneously. To avoid ambiguity, this study constructs the FD index through the principal component analysis (PCA). Moreover, the role of structural breaks has been considered through the analysis. Novel Bayer-Hanck combined cointegration analysis is employed to detect the existence of long-run relationships among underlying variables.

Investigating the nexus among sulfur dioxide emission, energy consumption, and economic growth: empirical evidence from Pakistan.

Developing countries like Pakistan majorly depend on fossil fuels for achieving higher economic growth but have sloppy environmental rules and regulations in order to attract foreign direct investment (FDI). As a result, energy consumption is considered the primary cause of environmental degradation. Besides CO2 emission, environmental degradation is also associated with emission of sulfur dioxide (SO2). The purpose of this study was to investigate the relationship among SO2 emissions, energy consumption, economic growth, and FDI in Pakistan. By applying the 3SLS method, study has estimated the scale effect, composition effect, and technique effect. The scale effect and technique effect findings indicated that capital stock, FDI, and SO2 emissions all had a significant impact on GDP. When the capital accumulation effects of FDI were considered, the relationship between FDI and stock of capital was found to be positive. According to the technique effect results, FDI, population density, and energy consumption were all significantly related to SO2 emissions. The study came to a conclusion with significant policy implications.

An empirical nexus between exchange rate and China's outward foreign direct investment: Implications for Pakistan under the China Pakistan economic corridor project

This study spotlights the determinants of Chinese outward foreign direct investment in Pakistan under the China Pakistan Economic Corridor using time series data. The stationarity was checked through augmented dicky fuller tests, and an auto-regressive distributive lag bounds test confirm long-run association among exchange rate, inflation, corruption, law & order situation, and Chinese outward foreign direct investment. The study conducted auto-regressive distributive lag (ARDL) for the short-run and long-run equilibrium covering annual time series data from 1990 to 2017. The empirical results indicate that exchange rates, inflation, and corruption have a negative and statistically significant effect on China's outward foreign direct investment in the host country. In contrast, law and order situations have an insignificant association with outward foreign direct investment. The findings further demonstrate that the error correction term is negative and highly significant at a 1 % level of significance. This is another indication of a stable long-run association among the variables. The estimated error correction term coefficient is −0.102, recommends that the short-run disequilibrium can be corrected at the speed of 10 %. Moreover, in the short run, corruption, inflation, and law and order are significantly affecting outward foreign direct investment. At the same time, export has no significant impact on outward foreign direct investment in the short run.

Estimating the key determinants of foreign direct investment flows in Pakistan: new insights into the co-integration relationship

PurposeThis empirical analysis tries to examine determinants of private foreign direct investment (FDI) in Pakistan using the bounds test approach. Main determinants of FDI among them are the size of the market (Q) macroeconomic stability (r), political stability (PRS), real exchange rate (REX) and institutional quality (INQ).Design/methodology/approachThis study used annual time-series data set starting from 1980 to 2016. This study has used time-series data with ARDL and error-correction model (ECM) and examined main determinants of FDI for Pakistan. The study used the Granger causality test (modified WALD test) to identify the causality among the variables.FindingsMoreover, empirical findings indicate the long-run relationship between GDP, trade openness and institutional quality toward FDI. However, political instability, inflation and real exchange rate harm FDI in Pakistan. Furthermore, results of Granger causality indicate that the bidirectional causality running from FDI and Q toward FDI is significant, providing evidence of FDI-led growth hypotheses in Pakistan. This study determines the correlation between FDI and Q (GDP growth) related to the “feedback hypothesis” in the short and long run. This study also concludes that the short-run causal connection among FDI, REX, PRS, r and Q follows the “feedback hypothesis.” This describes that FDI, REX, PRS, r and Q variables are jointly determined and affected together.Originality/valueThis study also explores the causal association between FDI and its significant determinants, by using methods of Granger causality test and the approach of Toda-Yamamoto-DoladoLutkephol (TYDL) to examine the causal relationship and its directions among these variables.

Impact of Good Governance Indicators on the Inflow of Foreign Direct Investment (FDI) In Pakistan

Foreign Direct Investment (FDI) occupies extensive importance in the socio-economic development of any economy. High inflow of Foreign Direct Investment (FDI) helps in the reduction of poverty, unemployment, and in achieving high economic growth in developing countries, like Pakistan. In home country, a good governance environment significantly affects the inflow of FDI. In this connection, the purpose of this study is to analyze the scenario of good governance in Pakistan and its impact on attracting FDI. For this study, time series data was used covering the period from 1996 to 2017. ABDL approach was used for estimation, the findings prove that there is a significant impact of Political Instability, Regulatory Quality, and Effectiveness of Government, whereas, Rule of Law (RL) as well as Corruption (CC) and exert an insignificant effect on the inflow of FDI in Pakistan during the mentioned time period. The study suggested that the Pakistani government needs to develop a good governance environment through better law and order situations, a transparent legal system, and effective policies with proper implementation; to ensure high FDI inflows in the country.