Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan

Rizwana Siddiqui () and Abdul Razzaq Kemal

MPRA Paper from University Library of Munich, Germany

Abstract: Foreign capital inflows (FKI) help an economy by financing the imbalance between income and expenditure. However, their impact on poverty in the recipient economy is a controversial issue. In this study, a static computable general equilibrium (CGE) model for Pakistan has been used to assess the impact of foreign capital on poverty. Several interesting results emerged from the study. FKI increase demand for goods for investment purposes that lead to the expansion of import-competing- sector machinery to fulfil domestic demand. However, the contraction of the majority of trading sectors combined with expansion of non-trading sectors of the economy have generated ‘Dutch disease effect’. The results show that FKIs have a positive impact on poverty in Pakistan. Trade liberalization of import of machinery reduces the negative effect of the decline in FKI. Rise in poverty in Pakistan may be attributed to the decline in foreign capital.

Keywords: FKI; Poverty; CGE model (search for similar items in EconPapers)
JEL-codes: F13 F2 I32 (search for similar items in EconPapers)
Date: 2019-01-01, Revised 2019-07
New Economics Papers: this item is included in nep-cmp and nep-int
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Published in Nust Journal of Social Sciences and Humanities 2.5(2019): pp. 129-152

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Related works:
Working Paper: Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan (2006)
Working Paper: Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan (2006)
Working Paper: Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan (2006)
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