The nexus between sectoral FDI and institutional quality: empirical evidence from Pakistan
Faculty / School
Faculty of Business Administration (FBA)
Department of Economics
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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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Shah, S. H., Ahmad, M. H., & Ahmed, Q. M. (2016). The nexus between sectoral FDI and institutional quality: empirical evidence from Pakistan. Applied Economics, 48 (17), 1591-1601. Retrieved from https://ir.iba.edu.pk/faculty-research-articles/62