Foreign Direct Investment Inflows and Labor Productivity in Pakistan: A Sector- Wise Panel Cointegration Analysis (original) (raw)

Impact of Foreign Direct Investment on Sectors of GDP Pakistan Perspective

International Journal of Science and Research (IJSR), 2016

The basic objective of this study was to check the impact of foreign direct investment on sectoral components of GDP (Agricultural Sector, Industrial Sector and Services Sector). Time series annual data from 1950 to 2010 was used and Engle Granger Cointegration(Two Step) Method was employed to get results. Augmented Dickey Fuller test was applied to check the stationarity of variable. All variable except foreign direct investment (FDI) were stationary at first difference and FDI was stationary at level. Regression analysis was consisted on two steps. In first step long run relationship was checked which was positive and significant. Residuals (ect) were generated and checked for unit root. Error correction term(ect) was stationary at level; it is the precondition of existence of long run relationship between dependent and independent variables. In second step, error correction model was estimated to check the short run relationship. Significant relationship was found between dependent and independent variables as the coefficient of error correction term(ect) was negative. Negative coefficient is the precondition of existence of short run relationship.

Foreign Direct Investment and Employment Nexus: Evidence from Pakistan

2016

Being a developing country, Pakistan is experiencing a severe problem of increased unemployment and shortage of capital. Because of this, Pakistan has to depend on capital inflows from abroad to increase the level of employment. Along with Pakistan’s current proactive policy and increasing economic globalization, the scale of attracting foreign investment has grown over the past few years. Foreign Direct Investment (FDI) is considered as the best supplement for domestic resources and can play a crucial role in promoting employment. This study evaluates the significance of FDI for increasing employment level in Pakistan and uncovers whether FDI alone is the best supplement to comparable domestic resources. Johansen Cointegration technique and Vector Error Correction Model (VECM) have been used on time series data ranging from 19802014 to assess the relationship in the short and long term between the three variables: FDI, Gross Domestic Product (GDP) and Employment Level. The results ...

The Role of Foreign Direct Investment in Pakistan’s Economic Growth and Its Impact on Employment

2020

Foreign direct investment (FDI) plays a significant role in promoting the economic growth and employment level of a country. The current study was conducted to analyze the impact of FDI on economic growth and employment level of Pakistan. Time series and secondary data were used ranging from 1990 to 2017. The data of Gross domestic product (GDP) and FDI inflow was collected from the World development data indicator (WDI), while data on employment (EMP) from international labor organization (ILO) estimates. ADF test and AR root test methods were used for FDI, GDP, and EMP. Using the regression results of the VAR model, variable relations were explained among each other with their lag values. The results of GDP L1 value show that GDP positively affects FDI, FDI LI shows that FDI positively affects FDI, and EMP L1 shows that employment positively affects FDI. Using GDP as a dependent variable, the result of FDI L2 value shows that FDI negatively affects GDP, EMP L1 value shows, employm...

Fiscal Consequences of Foreign Direct Investment on Pakistan Economy

2015

Foreign direct investment (FDI) helps in capital formation in an economy. It also contributes to economic growth in developing economies. Its impact depends on policies, available human resources, physical infrastructure and the nature of FDI in the economy. Since FDI is increasing in Pakistan, it is necessary to examine its effects on the economy. This study attempts to investigate the consequences of FDI on the economy of Pakistan. The annual time-series data and panel data are used from 1975 to 2011. Auto Regressive Distributive Lag (ARDL) co-integration technique and error correction model are used for time-series data analysis. The study finds that the long-run relationships exist in the economic growth model, sector-specific labor productivity model, sector-specific employment model, and domestic investment model. Short-run relationships exist in the economic growth model and domestic investment model. Short-run relationships also exist in the sector-specific labor productivity model in case of the secondary sector and sectorspecific employment model in case of the secondary and tertiary sectors. Short-run relationships do not exist in the primary sector's employment model, primary sector's labor productivity model and tertiary sector's labor productivity model. The study further reveals that the FDI has a positive and significant impact on economic growth and domestic investment. Sector-specific FDI has a positive and significant impact on sector-specific labor productivity in case of primary, secondary and tertiary sectors. Sector specific FDI also has a positive and significant impact on sectorspecific employment in case of secondary and tertiary sectors. It has an insignificant impact on the employment of primary sector.

The Causal Link Between Foreign Direct Investment (Fdi) and Economic Growth in Pakistan Economy

The impact of Foreign Direct Investment (FDI) on the economic growth of host countries, especially on the developing ones, is a major point of discussion by economists since 1980's. The study examines the impact of FDI on the factors of economic growth like gross domestic product (GDP), exports and imports of Pakistan by applying different econometric tests like Augmented Dickey Fuller (ADF) Unit Root Test, Johansen Cointegration Test, Vector Error Correction Model (VECM) and Granger Causality Test on time series data from 1981 to 2009. The result obtained proves that there is long run relationship between the macroeconomic variables. It has been proved that FDI granger the growth process of host counties, but the result obtained is not confirmed in the case of Pakistan. But, the economic growth of Pakistan does granger the FDI influx. In the end, there is bi-direction causality between GDP and exports; and FDI and exports.

Impact of Foreign Direct Investment on Employment Level In Pakistan: A Time Series Analysis

Journal of Law Policy and Globalization, 2013

The early 19 th century and 20th century is marked by a salient feature of close association between the economic progress and political freedom. This close association led to the phenomenon of globalization. Poor countries seek help from the rich countries and they too help them because, they also get benefit. Foreign direct investment play a key role in economic progress and this has a direct impact on employment level in any economy. This study focuses the impact of foreign direct investment on employment level in Pakistan. Data time span is 1970-2011. The variables in the study are employment level, foreign direct investment, exchange rate and GDP per capita. The study uses Johanson Co-integration approach to analyze the long run relationship between the dependent and independent variables. The result shows the existence of long run relationship.

Impact of foreign direct investment (FDI) on GDP: A Case study from Pakistan

This research study is related to FDI and GDP and the main aim of this research study is to validate the relationship between them. Foreign direct investment (FDI) is considered as a growth accelerating component that has received a great attention in developed countries even in developing and less developed countries during recent years. Now FDI has greater importance in closed economy. FDI benefits any economy in terms of technology, skilled labor and skills transfer to the host countries. For data collection, 30 year data from 1983 to 2012 was collected and the cobb-Douglas Production function is used to test the relationship. Our research variables are Gross Capital Formation (K), Labor (L), Health Expenditure (H), FDI and openness to trade in export oriented economy (OP*FDI). We have followed the Bhagwati's hypothesis that was: FDI has greater impact on GDP in the export oriented economy. For data analysis, we have examined the descriptive statistics, correlation and regression model. For this we incorporate the production function in regression model. In brief, our results show that there is a positive relationship between FDI and GDP in Pakistan. But, Pakistan has not sufficient flow of FDI during past decades. And main point to consider which is evident through statistics and results is that there is greater impact of FDI in the open trade policy regimes. It is also concluded that FDI impact may be situation and culture related. So, the extent of FDI economic benefits cannot be predicted.

Impact of FDI (Foreign Direct Investment) on the Economy of Pakistan

International Journal Of Economics & Finance, 2021

Aims and Objectives: The research aims to investigate the impact of Foreign Direct Investment on the economy of Pakistan. An extensive role is played by FDI in the growth and development of developing states. The reason behind this is that FDI assists in transferring advanced technologies knowledge and enhance levels of output to the host states. Methodology: In this research, secondary data collection has been applied. This technique allows data collection from authentic economic resources such as the World Bank, World development indicators and Central Banks of the countries. The data is analysed by using the ADF augmenteddickey fuller test, and in the next step ARDL test is applied. In the last step, the Granger causality test is applied in order to examine the short-run association amid variables. Results and Findings: The findings of this study suggest no long-run or short-run effect of FDI on the economic development and growth of Pakistan.

Foreign Direct Investment and Trade Components in Context of Pakistan

Objective of this paper was to evaluate the impact of foreign direct investment (FDI) on trade components (exports and imports) of Pakistan using annual data from 1975 to 2013. Engle and Granger two step cointegration method was used for conducting the analysis. This method was adopted because all the variables of interest were non stationary in level and stationary at first difference. Results provide evidence of long run cointegrating relationship as well as short run relationship between FDI and trade components. A rise in FDI causes both exports and imports to increase. Based on these empirical findings, we strongly recommend Government of Pakistan to focus on the strategy of investment liberalization as well as trade openness.

The Role of FDI in Economy of Pakistan for the Period of 1971-2018

2019

Foreign direct investment (FDI) affects the economic growth of the host economy through technology transfer, human resource formation, global market integration and enhancement of competition. A variety of previous empirical studies indicate that FDI is an essential source in the host country’s economic growth. Some studies also came up with the ambiguous results, provided that the current study aims to investigate the impact of foreign direct investment on the economic growth of Pakistan. The study utilizes time series data over the period of 1971 to 2018. Autoregressive Distributed Lag-Error Correction Model (ARDL-ECM) technique has been applied to investigate the short-run and long-run effects. The results of the study show that FDI has a positive and a significant impact on the economic growth of Pakistan in both short-run and long-run analysis.