The Determinants of Foreign Direct Investment in Pakistan: An Empirical Investigation (Foreign CAPTAL INFLOW, SAVINGS, AND Investment) (Report‪)‬

This paper empirically investigates the determinants of foreign direct investment (FDI) in Pakistan, with special emphasis on the public policy instruments that can be used to accelerate FDI-related activities. Using time series data from 1960-61 to 1999-2000, it is observed that the outcomes are more consistent with the hypotheses. The application of the Ordinary Least Squares (OLS) Technique and the Johansen-Juselius Cointegration technique suggests that FDI flows in Pakistan have a long-run relationship with well-known determining factors like market size, the cost of capital, tariff, infrastructural provisions and political stability. However, a restrictive role in the short-run dynamics is questionable and needs further inquiry for policy formulation. Highly significant co-efficients of the selected exogenous variables best fit the model for FDI determinants. 1. INTRODUCTION