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Nexus of Economic Misery, Interest rate, Exchange rate and Foreign Direct Investment in Pakistan

Author

Listed:
  • Allah Ditta

    (Department of Economics, University of the Punjab, Lahore, Pakistan)

  • Ahmad Hassan

    (Department of Economics, University of the Punjab, Lahore, Pakistan)

Abstract

This study investigates the impact of economic misery, exchange rate and interest rate on foreign direct investment (FDI) in case of Pakistan over the period of 1972- 2013. The time series data for all variables is collected from various issues of Economic Surveys of Pakistan, State bank of Pakistan and WDI. This study has used Augmented Dickey-Fuller (ADF) and Philips Perron (PP) unit root tests for stationarity of the variables and Autoregressive Distributive Lag (ARDL) is used for co-integration among the variables of the model. The results show that there is negative and insignificant impact of economic misery and political instability on FDI in Pakistan. Exchange rate has positive and significant relationship with FDI over the selected time period. Exports have a negative and insignificant impact of FDI. Interest rate and GDP has a positive and significant relationship with FDI in case of Pakistan.

Suggested Citation

  • Allah Ditta & Ahmad Hassan, 2017. "Nexus of Economic Misery, Interest rate, Exchange rate and Foreign Direct Investment in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(1), pages 35-44, March.
    • Handle: RePEc:rfh:bbejor:v:6:y:2017:i:1:p:35-44
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    References listed on IDEAS

    as
    1. Ray Barrell, 2003. "Foreign Direct Investment and Exchange Rate Uncertainty in Imperfectly Competitive Industries," National Institute of Economic and Social Research (NIESR) Discussion Papers 220, National Institute of Economic and Social Research.
    2. Sumera Arshad & Amajd Ali, 2016. "Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(4), pages 193-209, December.
    3. Abdul Aziz FaridSaymeh & Marwan Mohammad Abu Orabi, 2013. "The Effect of Interest Rate, Inflation Rate, GDP, on Real Economic Growth Rate in Jordan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(3), pages 341-354, March.
    4. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 82496, University Library of Munich, Germany, revised 2015.
    5. Kozo Kiyota & Shujiro Urata, 2004. "Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 27(10), pages 1501-1536, November.
    6. Manop Udomkerdmongkol & Holger Görg & Oliver Morrissey, 2006. "Foreign Direct Investment And Exchange Rates: A Case Study Of U.S. Fdi In Emerging Market Countries," Discussion Papers 06/05, University of Nottingham, School of Economics.
    7. Osinubi, T. S. & Amaghionyeodiwe, L. A, 2009. "Foreign Direct Investment and Exchange Rate Volatility in Nigeria," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 9(2).
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    Cited by:

    1. Suha Alawi, 2019. "The Effect of Direct Foreign Investment on Stock Price Volatility in the Saudi Market," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(8), pages 875-887, August.
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    3. Saqib Amin & Nawaz Ahmad & Asim Iqbal & Ghulam Mustafa, 2021. "Asymmetric analysis of environment, ethnic diversity, and international trade nexus: empirical evidence from Pakistan," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(8), pages 12527-12549, August.

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    More about this item

    Keywords

    Exchange Rate; Interest Rate and Foreign Direct Investment;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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