Foreign Direct Investment Lead to Exports of Pakistan: An Econometric Evidence

Abstract

The objective of the study is to empirically analyze that whether foreign direct investment lead to exports of Pakistan for the period from 1972 to 2014. Econometric results are estimated using Partial Adjustment Model for long run as well short run and then some diagnostic statistics are also applied for reliability of results. Long run and short run results propose positive influence of foreign direct investment, exchange rate, trade openness, and real GDP of Pakistan while inflation is found to have inverse effect of exports of Pakistan. Further tests indicate regression model free from Autocorrelation, Heteroskedasticity, abnormality of residuals and dynamic instability problems.

Keywords: Foreign Direct Investment, Real GDP, Exports, Exchange Rate, Inflation.