Abstract
Purpose: The objective is to investigate the impact of exchange rate on FDI inflows in Pakistan, which is a developing economy. Along-with exchange rate, the cardinal variable, external debts and market size variables also have been used for the purpose of this study. Methodology: To deal with integration of variables at different order, i.e. one or zero, bounds testing approach to cointegration and for short and long-run effects estimation, auto-regressive distributed lag (ARDL) model have been used. Findings: Exchange rate is found positive highly significant with FDI inflows in short and long-run. Decrease in the value of exchange rate of recipient country results in the reduction of FDI inflows. Market size depicts positive impact in short and long-run for FDI inflows. External debts, surprisingly, show positive relationship in long-run and negative in short-run, where these positive and negative impacts are further investigated in the study. Originality: Since the Pakistan is experiencing very low growth of FDI inflows when compared to the region, it becomes directly policy relevance to identify the underlying factors responsible for this decline.
Muhammad Akram, Hassan Mobeen Alam. (2017) The Impact of Exchange Rate Movement on Foreign Direct Investment Inflows in Pakistan: An Empirical Assessment Using ARDL Approach to Cointegration, Journal of the Punjab University Historical Society, Volume 30, Issue 2.
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