Empirical Analysis of Macroeconomic Determinants on Foreign Direct Investment Inflows in Pakistan

Abstract

Foreign Direct Investment is a significant component for escalating economic growth of a country. Meanwhile, several domestic factors are held responsible for influencing the flow of foreign direct investments of a country. The purpose of this paper is to investigate the influence of macroeconomic variables on the inflow of foreign capital in Pakistan. Data for 30 years ranging from 1986 – 2015 has been taken for analysis. The data has been extracted from Statistical Bulletins of State Bank of Pakistan. Descriptive and Inferential Statistical analysis used as to evaluate the data. Ordinary Least Square Estimation Technique is employed to find out the significance of independent variables against the dependent variable. The study concludes that GDP, Inflation, Imports and Exchange Rate significantly influence the Foreign Direct Investment inflows in Pakistan.

Keywords: Foreign Direct Investment, Gross Domestic Product, Exchange rate, Inflation.