PhD Theses and Dissertations

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Browsing PhD Theses and Dissertations by Author "Muhammad Azam Khan"

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    Analysis of the Factors Determining Foreign Direct Investment and Economic Growth of Pakistan (1971-2005)
    (Department of Economics, University of Peshawar. Khyber Pakhtunkhwa, Pakistan, 2009) Muhammad Azam Khan; Supervised by Dr. Naeem-ur-Rehman Khattak
    The broad aim of the present study is to evaluate the influence of various economic, social and political determinants of host country in enhancing foreign direct investment (FDI). Further, an attempt has been madein this study to examine the impacts of domestic investment, foreign direct investment, human capital and trade openness on economic growth of Pakistan. For analysis secondary data has been utilized over the time period from 1971 to 2005, taken from Federal Bureau of Statistics, Pakistan Economic Survey and World DevelopmentIndicator various issues. Regression models have been used and the methods of Least Square, Two Stage Least Square, and Generalized Method of Moment have been applied as analytical techniques for the empirical estimation. In addition, Augmented Dickey Fuller test and Error Correction Mechanism areused to checkstationarity in the level of data. It has been argued that foreign capital inflow particularly in the form of FDIis likely to encourage national economic developmentin a host country by playing supportive role to local investment and by bringing many other benefits. FDI is the amountinvested by resident of a country in a foreign enterprise over which they have effective control. Almost two and half decades ago an excessive increase occurred in the global FDI inflow due to world globalization. Pakistan is a developing country and characterized by low per capita income, burden of external debt, lack of capital, low saving rate, rapid growth of population, and deficit in balance of payment etc. Domestic resources are short to finance the development needs of the country, therefore, FDI is one of the important sources of external finance for the economic developmentof Pakistan. Thus in order to have increased level of FDI in Pakistan, efforts has been made by the government of Pakistan by offering incentives to the investors in thecountry. But Pakistan has not yet enhanced desirable amount of FDI even offering many incentives to the investors. The empirical results of FDI economic modelin the presentstudy such as market size, infrastructurefacilities, domestic investment, trade openness, external debt and indirect taxes of the host country have been foundstatistically significant. But government consumption has been foundstatistically insignificant in the study. Similarly in the socio-political model a positive andstatistically significant relationship has been found between human capital and FDI inflows, while the result of political instability indicates though an inverse relationship with FDI but insignificant. For comparison, the study in hand comprised of one each econometric model for economic determinant of FDI for India and Indonesia respectively. The empirical results of India matched with the results of Pakistan excluding two determinates (viz, trade openness and government consumption) while the results of Indonesia do not match with the economic determinants of FDIfor Pakistan. The empirical result of the economic growth model indicates that expansion in domestic investment, trade openness and FDI promote economic growth but human capital has been foundstatistically significant with unexpected negative sign. In simultaneous equations model, from the economic growth equation,it has been foundthat the impacts of domestic investment, trade openness and FDI are statistically significant. Likewise the FDI equation indicates that FDI is positively related to growth rate, domestic investment and trade openness, while external debt negatively as expected. Therefore, on the basis of importance of FDI for boosting of economic growth,it has been concluded that to enhance more FDI into Pakistan, the management authorities may make efforts to improve Pakistan's image in the international community, ensure stable economic and political environment, provision of quality infrastructure, controlling inflation rate, peace and security, law and ordersituation and consistency in the governmentpolicies because these all are the key factors for potential investors in making investment choices. Thus to achieve higher levels of sustainable economic growth, improved living standard, alleviation of poverty, generating employment opportunities, socio-economic developmentand sustainable foreign investment- it is proposed, that the managementauthorities may give equal importance to follow appropriate macroeconomicstabilization policies (fiscal and monetary policies) accordingly.