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The Impact of Exchange Rate, Interest Rate and Economic Misery on Foreign Direct Investment: Empirics from Pakistan

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  • Muhammad Zahid Naeem

    (Assistant Professor, Department of Economics, University of The Punjab, 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- 2019. 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 foreign direct investment in Pakistan. Exchange rate has positive and significant relationship with foreign direct investment over the selected time period. Exports have a negative and insignificant impact of foreign direct investment. Interest rate and GDP has a positive and significant relationship with foreign direct investment in case of Pakistan.

Suggested Citation

  • Muhammad Zahid Naeem, 2021. "The Impact of Exchange Rate, Interest Rate and Economic Misery on Foreign Direct Investment: Empirics from Pakistan," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 7(1), pages 36-43, March.
    • Handle: RePEc:rfh:jprjor:v:7:y:2021:i:1:p:36-43
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    References listed on IDEAS

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    1. 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.
    2. 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).
    3. 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.
    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.
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    Cited by:

    1. Marc Audi & Amjad Ali, 2023. "Public Policy and Economic Misery Nexus: A Comparative Analysis of Developed and Developing World," International Journal of Economics and Financial Issues, Econjournals, vol. 13(3), pages 56-73, May.

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    More about this item

    Keywords

    Exchange Rate; Interest Rate and Foreign Direct Investment;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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