The Determinants of FDI Inflows in Pakistan

Abstract

This research focuses on how the economic conditions of an economy impact the foreign direct investment inflows it receives. The variables tested for a relationship with FDI are exchange rate, trade, inflation, and GDP growth rate. This is unlike most work done on this topic in the past, as most researches tend to cover the influence of FDI on economic growth, and not the factors that effect FDI itself. Pakistan received FDI inflows of 3434.90 USD Million in 2017. These finances are critical for economic growth of the country, as it has been established by previous researches. Hence, it is of paramount importance to investigate the prime sources that lead to greater levels of FDI inflows. The data used for our study has been procured from the World Bank database. All variables have data from 1980-2016. The autoregressive distributed lag model is used to model the relationship between the independent variables and FDI inflows