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Friday, 3 February 2012

MACROECONOMIC FACTORS DETERMINING FDI IMPACT ON PAKISTAN'S GROWTH

EarlyCite Article

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
Abstract:

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

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