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Financial Risk and Foreign Direct Investment: Evidence from Pakistan Economy

Author

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  • Ali, Muhammad Ali
  • Asfand, Asfand Yar Khattak
  • Bakhtiyar, Bakhtiyar Khan
  • Hammad, Raja Hammad Amhed

Abstract

The purpose of this paper is to inspect whether Financial risk influence FDI in Pakistan economy. In order to achieve the study objective and to answer the question, the Unit root test, Co integration test, OLS methodology and Granger causality test has been used. Time series data for the year 1982 to 2011 is used and this study measures the financial risk by considering foreign debt services, exchange rate, foreign debt and current account. The study results signify that efficient use of foreign debt can attract more foreign direct investment in the country. The paper shows that financial risk has significant impact on foreign direct investment.

Suggested Citation

  • Ali, Muhammad Ali & Asfand, Asfand Yar Khattak & Bakhtiyar, Bakhtiyar Khan & Hammad, Raja Hammad Amhed, 2014. "Financial Risk and Foreign Direct Investment: Evidence from Pakistan Economy," MPRA Paper 60779, University Library of Munich, Germany, revised 12 Dec 2014.
    • Handle: RePEc:pra:mprapa:60779
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    References listed on IDEAS

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    6. 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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    9. Khrawish, Husni Ali & Siam, Walid Zakaria, 2010. "Determinants of direct foreign investment: Evidence from Jordan," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 1(1), pages 1-9, April.
    10. Husni Ali Khrawish & Walid Zakaria Siam, 2010. "Determinants of direct foreign investment: Evidence from Jordan," Business and Economic Horizons (BEH), Prague Development Center, vol. 1(1), pages 67-75, April.
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    Cited by:

    1. Feyza BALAN, 2019. "The effects of political and financial risks on foreign direct investments to the MENAT countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(619), S), pages 121-138, Summer.
    2. Mehmet H. TOPAL & Özlem S. GÜL, 2016. "The Effect of Country Risk on Foreign Direct Investment: A Dynamic Panel Data Analysis for Developing Countries," Journal of Economics Library, KSP Journals, vol. 3(1), pages 141-155, March.

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    More about this item

    Keywords

    Foreign direct investment; foreign debt; exchange rate; current account; financial risk.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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