|Title:||MACROECONOMIC FACTORS DETERMINING FDI IMPACT ON PAKISTAN'S GROWTH|
|Author(s):||Khalid Zaman, (COMSATS Institute of Information Technology), Iqtidar Ali Shah, (COMSATS Institute of Information Technology), Muhammad Mushtaq Khan, (COMSATS Institute of Information Technology), Mehboob Ahmad, (Bahria University)|
|Citation:||Khalid Zaman, Iqtidar Ali Shah, Muhammad Mushtaq Khan, Mehboob Ahmad, (2012) "MACROECONOMIC FACTORS DETERMINING FDI IMPACT ON PAKISTAN'S GROWTH", South Asian Journal of Global Business Research, Vol. 1 Iss: 1|
|Article type:||Research paper|
|Publisher:||Emerald Group Publishing Limited|
Purpose - The objective of the study is to identify major macroeconomic factors that enhance FDI for Pakistan through the cointegration and error correction model over a 28-year time period, i.e. between 1980 and 2008.
Design/methodology/approach - The study employed the Johansen cointegration technique to estimate the long-run relationship between the variables, while an error correction model was used to determine the short-run dynamics of the system.
Findings - Finding suggests that FDI has had a significant positive impact on Pakistan’s economic growth in the long-run. For example, trade liberalization and their interactive terms have a positive effect in the short-run while a negative effect is observed in the long-run upon economic growth of Pakistan. The results indicate that due to a low quality of human capital in Pakistan; the direct effect of FDI on economic growth becomes negative.
Research limitations/implications - We limited our study to a few variables, including human capital, trade openness, government size, population, consumer price index in order to manage robust data analysis. Practical / Policy Implications: We find that for FDI to be a significant contributor to economic growth in Pakistan, government must focus upon improving physical infrastructure, and quality of human resources.
Originality/value - The study confirms that Pakistan did not enjoy substantial growth benefits from FDI because human capital, trade openness, government size and interactive terms of FDI and per capita income have a negative impact on economic growth. These findings have important policy implications.
Emerald | South Asian Journal of Global Business Research | MACROECONOMIC FACTORS DETERMINING FDI IMPACT ON PAKISTAN'S GROWTH