Impact of Exchange Rate on FDI in Pakistan

Abstract

The main objective of this study is to investigate the relationship of Foreign Direct Investment (FDI) with exchange rate. The set of the determinants of FDI can be very large but exchange rate is one of the intense determinants. On the other hand, exchange rates have become extremely volatile due to its weakness to adapt to the changes in domestic and international financial markets. In this study, time series data have been used for foreign direct investment, exchange rate, GDP, imports, exports and inflation from 2003-2013 for Pakistan. After collection of data on above stated variables, several tests (multiple regression, descriptive statistics, and correlation) have been applied for the purpose of analysis in SPSS 20. The results squeezed from the study express that FDI is most probably associated with Rupee depreciation (ER). This research will help the managers, related organizations and future researchers to make or revise the further economic decisions.