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Measuring the Impact of FDI and Private Domestic Investment on Growth-Case of South Asia

Author

Listed:
  • Maham Bokhari

    (Ministry of Planning, Development, & Reform, Islamabad)

  • Syed Akhtar Hussain Shah

    (Ministry of Planning, Development, & Reform, Islamabad)

Abstract

This paper examines the impact of private domestic investment (PDI) on growth in comparison with the Foreign Direct Investment (FDI). It aims to conduct a cross country analysis of South Asia from 1975 to 2017. Trade Openness, Inflation, Government Expenditure, Human Capital, Exchange Rate are control variables of interest for the investment model used in this research. The countries tested are Bangladesh, India, Pakistan and Sri Lanka. Fixed Effects and Random Effects method is employed to test the panel data of the four South Asian countries. The results show that in case of South Asia on the whole, there is a positive and significant impact of PDI on growth. To further analyse the subject and put forward a potential policy for the region, the regression is decomposed into sectoral Private Domestic Investment: Primary, Secondary and Services. PDI affects the growth of South Asia, only when it is invested in the manufacturing or the primary sector.

Suggested Citation

  • Maham Bokhari & Syed Akhtar Hussain Shah, 2019. "Measuring the Impact of FDI and Private Domestic Investment on Growth-Case of South Asia," PIDE-Working Papers 2019:161, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:wpaper:2019:161
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    References listed on IDEAS

    as
    1. Abdur Chowdhury & George Mavrotas, 2005. "FDI and Growth: a Causal Relationship," WIDER Working Paper Series RP2005-25, World Institute for Development Economic Research (UNU-WIDER).
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    3. Iamsiraroj, Sasi & Ulubaşoğlu, Mehmet Ali, 2015. "Foreign direct investment and economic growth: A real relationship or wishful thinking?," Economic Modelling, Elsevier, vol. 51(C), pages 200-213.
    4. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969.
    5. Ozturk, I., 2007. "Foreign Direct Investment – Growht Nexus: A Review of The Recent Literature," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 4(2), pages 79-98.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    FDI (Foreign Direct Investment); PDI (Private Domestic Investment); Trade Openness;
    All these keywords.

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