The nexus between sectoral FDI and institutional quality: empirical evidence from Pakistan

Author Affiliation

Qazi Masood Ahmed is Professor & Director CBER at Institute of Business Administration (IBA), Karachi

Faculty / School

Faculty of Business Administration (FBA)


Department of Economics

Was this content written or created while at IBA?


Document Type


Source Publication

Applied Economics




This study investigates short- and long-run bidirectional causality between institutional quality and sectoral-level FDI in Pakistan by using the ARDL technique. The results confirm that long-run bidirectional causality exists between institutional quality and aggregate FDI. The in-depth sectoral-level FDI analysis substantiates the presence of long-run bidirectional causality between institutional quality and FDI in services and manufacturing sectors, while no long-run causality is observed between institutional quality and FDI inflows in primary sector. Furthermore, the results in the study reveal short-run bidirectional causality only between institutional quality and manufacturing FDI and report insignificant short-run causal link between institutional quality and FDI in primary and services sectors. The overall findings of the study suggest that in the long-run institutional quality attract FDI and FDI inflows, particularly to manufacturing and services sectors, significantly enhance the quality of institutions in Pakistan.

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HJRS - W Category, Scopus, Web of Science - Social Sciences Citation Index (SSCI)

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Impact Factor: 1.835

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