Foreign capital inflows and domestic savings in Pakistan: Cointegration techniques and error correction modelling
Faculty / School
Faculty of Business Administration (FBA)
Department of Economics
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Pakistan Development Review
FDI, Domestic saving, Domestic investment, OLS, Foreign capital inflow, Macroeconomic variable
Geography | Growth and Development | Social and Behavioral Sciences
The present study investigates the relationship between domestic savings and foreign capital inflows in Pakistan using cointegration and error-correction modelling of handling the non-stationary time series data. Applying three different cointegration techniques, the findings in this paper indicate that there is a valid long-run inverse relationship between domestic savings and foreign capital inflows. The Unrestricted Error Correction Model found short-run significance inverse relationship between domestic savings and foreign inflows but Short-Run Dynamic Engle-Granger procedure found insignificant inverse relationship between these two variables. The empirical results support the "Substitution thesis" hypothesis.
HJRS - Y Category, Scopus
Ahmad, M. H., & Ahmed, Q. M. (2002). Foreign capital inflows and domestic savings in Pakistan: Cointegration techniques and error correction modelling. Pakistan Development Review, 41 (4 PART 2), 825-836. Retrieved from https://ir.iba.edu.pk/faculty-research-articles/85