TY - JOUR
T1 - Why Did FDI Inflows of Pakistan Decline? From the Perspective of Terrorism, Energy Shortage, Financial Instability, and Political Instability
AU - Bano, Sadia
AU - Zhao, Yuhuan
AU - Ahmad, Ashfaq
AU - Wang, Song
AU - Liu, Ya
N1 - Publisher Copyright:
©, Copyright © Taylor & Francis Group, LLC.
PY - 2019/1/2
Y1 - 2019/1/2
N2 - Foreign direct investment (FDI) inflows are important for economic development in all countries, especially developing ones. In many developing countries, FDI inflows have increased over the past two decades. However, in Pakistan FDI inflows declined over the past decade. This study examines the reasons for declining FDI inflows to Pakistan, considering the main issues, such as terrorism, energy shortages, financial instability, and political instability, with some macroeconomic indicators as control variables. These analyses are based on pre- and post-global financial crisis events, and we check the robustness by controlling for the global financial crisis. Our analyses are conducted using an autoregressive distributed lag model (ARDL) for co-integration among variables. The results show that energy shortages, financial instability, and political instability have adverse effects, and terrorism has insignificant effects on FDI inflows to Pakistan before the financial crisis in the long term. However, the post-financial crisis period indicates that terrorism and energy shortages are the main drivers of decline in FDI inflows to Pakistan. Market size, inflation, and exchange rates affect FDI inflows positively. The global financial crisis has an adverse impact on FDI inflows to Pakistan. This study is helpful for the Pakistani government as it attempts to design useful policies for attracting FDI.
AB - Foreign direct investment (FDI) inflows are important for economic development in all countries, especially developing ones. In many developing countries, FDI inflows have increased over the past two decades. However, in Pakistan FDI inflows declined over the past decade. This study examines the reasons for declining FDI inflows to Pakistan, considering the main issues, such as terrorism, energy shortages, financial instability, and political instability, with some macroeconomic indicators as control variables. These analyses are based on pre- and post-global financial crisis events, and we check the robustness by controlling for the global financial crisis. Our analyses are conducted using an autoregressive distributed lag model (ARDL) for co-integration among variables. The results show that energy shortages, financial instability, and political instability have adverse effects, and terrorism has insignificant effects on FDI inflows to Pakistan before the financial crisis in the long term. However, the post-financial crisis period indicates that terrorism and energy shortages are the main drivers of decline in FDI inflows to Pakistan. Market size, inflation, and exchange rates affect FDI inflows positively. The global financial crisis has an adverse impact on FDI inflows to Pakistan. This study is helpful for the Pakistani government as it attempts to design useful policies for attracting FDI.
KW - FDI inflows
KW - energy shortage
KW - financial instability
KW - political instability
KW - terrorism
UR - http://www.scopus.com/inward/record.url?scp=85054318553&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2018.1504207
DO - 10.1080/1540496X.2018.1504207
M3 - Article
AN - SCOPUS:85054318553
SN - 1540-496X
VL - 55
SP - 90
EP - 104
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 1
ER -