The causal relationship between Foreign Direct Investment and Current Account: an empirical investigation for Pakistan economy

Danish Siddiqui, Mohsin Ahmad and Muhammad Asim
Additional contact information
Muhammad Asim: Karachi University Business School, University of Karachi, Pakistan

Theoretical and Applied Economics, 2013, vol. XX, issue 8(585), 91-106

Abstract: This paper investigates relationship between FDI and current account (CA) in Pakistan using the Johansen-Juselius cointegration technique and the Granger causality test. The study results indicate that FDI and CA are cointegrated and thus exhibit a reliable long run relationship. The Granger causality test findings indicate that the causality between FDI and CA is uni-directional. However, there is no short run causality from FDI to CA and vice versa. Therefore, as a policy implication that FDI inflows may cause to the deterioration of the balance of payments in the long run should be taken into account when policy makers decide to implement policies to attract foreign investors.

Keywords: Asia; Pakistan; Cointegration; Granger; FDI; causality; Current Account. (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://store.ectap.ro/articole/893.pdf (application/pdf)
http://www.ectap.ro/articol.php?id=893&rid=101 (text/html)

Related works:
Working Paper: The Causal Relationship between Foreign Direct Investment and Current Account: An Empirical Investigation for Pakistan Economy (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xx:y:2013:i:8(585):p:91-106

Access Statistics for this article

Theoretical and Applied Economics is currently edited by Mircea Dinu

More articles in Theoretical and Applied Economics from Asociatia Generala a Economistilor din Romania / Editura Economica Contact information at EDIRC.
Bibliographic data for series maintained by Mircea Dinu ().