This paper will focus on the impact of domestic interest rate and political instability on FDI of Pakistan using time series data from 1989-2019 in case of Pakistan.
The findings are that political instability has a major impact for short time period and in long time period but in case of interest rate there is a negative minimal impact on FDI in both span of time. This can be because when you have lower nominal interest rate, thenyour domestic investor will benefit and country GDP will rise.
Table of Contents
Abstract
Introduction
1.1 Background of the study
1.2 Objectives
1.3 Limitation of the study
1.4 Layout of the study
2 Literature Review
2.1 Literature from Developved World
2.1.1 Literature From Developed World
2.1.2 Literature from developing World
2.2 Theoretical review
2.3 Summary: Rationale of the Study
3- Conceptual Framework and Strategy
3.1 Model Specification
3.2 Variable Description
3.3 Data sources
4 Research Design and methodology
4.1 Model specification
4.2 Methodology
4.3 Results and discussion
5 Conclusion
5.1 Policy suggestion
Objectives and Research Focus
This research aims to analyze the determinants of Foreign Direct Investment (FDI) in Pakistan, specifically examining the impact of domestic nominal interest rates and political instability using time-series data from 1989 to 2019 to provide policy recommendations for economic growth.
- Analysis of the relationship between domestic nominal interest rates and FDI in Pakistan.
- Evaluation of how political instability affects FDI inflows.
- Utilization of quantitative econometric techniques, specifically ARDL and multiple regression.
- Identification of barriers to FDI and development of strategies for economic enhancement.
Excerpt from the Book
1.1 Background of the study
Foreign Direct Investment is a core ingredient in the economic development of any country and it is also a result of globalization. According to world Bank world inflow of FDI has almost more than tripled ,in 2001 it was 6.51 US $ to 23 Billion $ In 2020 and major share of this inflow was developing countries such as china India contribute almost 25% and remaining share goes to developed countries FDI is done on many developing countries because of availability of cheap labor, uninterrupted availability of raw materials, less production cost compared to developed countries and quick and easy penetration into the markets and many others factors which can bring energy to the stagnate economies through inflow of FDI. . It is a booster for a staggering economy according to many economist and policy makers and today many of the modern developed countries like china have witnessed of this booster(FDI) and before dipping into the ocean we must understand the FDI in every angles.
Direct Investment is an investment made by a firms, individuals into a business which is located into another country and that foreign investor have controlled in that business and according to Organization Of Economic Corporation and Development(OECD) the foreign investor must have at least 10% or more share into that business in which he is investing .FDI (real investment) is also refers as a purchasing of physical assets like machinery ,building etc. into another country ,it may also include transferring of technology into the host country like Apple which is a US company but their major share of production in china .Businesses that invested into other countries are called multinational corporations . we must also know about financial investment (portfolio investment) in which purchasing of shares by a foreign investor of an existing companies and buying of bonds, this type of investments is short term. This type of investment provides “hot money “to the host country and improve the foreign exchange reserve.
Chapter Summaries
Introduction: Provides a background on FDI, its definition, and the context of the study within Pakistan's economic landscape.
Literature Review: Summarizes existing empirical studies and theoretical frameworks regarding the drivers and inhibitors of FDI worldwide and specifically in Pakistan.
Conceptual Framework and Strategy: Outlines the variables used in the study, including FDI, nominal interest rates, and political instability.
Research Design and methodology: Details the econometric models and quantitative techniques, such as ARDL, used to analyze the time-series data from 1989 to 2019.
Conclusion: Discusses the findings of a negative relationship between interest rates, political instability, and FDI, while offering policy suggestions for improving the investment climate.
Keywords
Foreign Direct Investment, FDI, Pakistan, Political Instability, Nominal Interest Rate, ARDL, Time Series, Economic Growth, Macroeconomic Indicators, Regression Analysis, Business Environment, Policy Suggestion, Developing Economies, Investment Climate, Econometrics.
Frequently Asked Questions
What is the core focus of this research paper?
The paper investigates the impact of domestic nominal interest rates and political instability on Foreign Direct Investment (FDI) inflows in Pakistan from 1989 to 2019.
What are the primary themes discussed in the study?
The study covers the definitions of FDI, the historical trends of investment in Pakistan, the role of political stability in economic development, and the influence of interest rates on capital flows.
What is the main research objective?
The goal is to determine the specific effects of interest rates and political instability on FDI and to find viable ways to boost FDI in Pakistan through policy adjustments.
Which research methods were employed?
The author uses quantitative methods, specifically multiple regression techniques, Ordinary Least Squares (OLS), and the Autoregressive Distributed Lag (ARDL) model to assess both short-run and long-run relationships.
What topics are covered in the main body of the paper?
The body includes a comprehensive literature review, the model specification, data description, the results of stationarity tests (ADF), and regression analysis outcomes regarding FDI performance.
Which keywords best characterize this work?
Key terms include FDI, political instability, nominal interest rates, Pakistan, ARDL techniques, and macroeconomic development.
Why did the author use the ARDL model in this study?
The ARDL model was chosen to effectively test for both long-run and short-run relationships between the variables in the time-series data.
What is the author's key conclusion regarding interest rates?
The study concludes that there is a negative relationship between domestic nominal interest rates and FDI, suggesting that lower interest rates may encourage domestic investment, leading to economic growth that subsequently attracts FDI.
How does political instability affect the findings?
The research identifies a significant negative impact of political instability on FDI, emphasizing that a stable political environment is a prerequisite for attracting foreign investment.
- Quote paper
- Asif Hussain (Author), 2021, The Impact of Political Instability and Nominal Interest Rate on Foreign Direct Investment. The Case of Pakistan, Munich, GRIN Verlag, https://www.grin.com/document/1059827
