Analyzing the Impact of Foreign Capital Inflows and Political Economy on Economic Growth: An Application of Regime Switching Model

Nabila Khurshid (), Hamza Sharif, Mosab I. Tabash (), Basem Hamouri, Asma Fiaz and Fozia Munir
Additional contact information
Nabila Khurshid: Department of Economics, Comsats University Islamabad, Islamabad 44000, Pakistan
Hamza Sharif: Department of Economics, Comsats University Islamabad, Islamabad 44000, Pakistan
Mosab I. Tabash: College of Business, Al Ain University, Al Ain P.O. Box 64141, United Arab Emirates
Basem Hamouri: Department of Finance and Banking Sciences, Amman University College of Financial and Administrative Science, Al-Balqa Applied University, Al-Salt P.O. Box 19117, Jordan
Asma Fiaz: School of Economics, Quaid-e-Azam University, Islamabad 45320, Pakistan
Fozia Munir: Department of Economics, Comsats University Islamabad, Islamabad 44000, Pakistan

Economies, 2023, vol. 11, issue 7, 1-17

Abstract: The goal of this study is to use the Markov Regime Model (MSM) to evaluate the impact of three important FCIs and the political economy on Pakistan’s economic growth. The current research used quarterly data from 2000 to 2020. The empirical results demonstrate that dictatorship contributes favorably to the high and low growth regime of the economy, while election time contributes positively to the expansion period and adversely in recession times of the economy. Results confirmed that external debt has a strong negative influence on economic growth in both the high and low-growth regimes. Remittances, FDI, and growth, on the other hand, have a positive and substantial link with economic growth. This research suggested that effective fiscal and monetary policies, as well as a suitable political environment, should be provided so that foreign investors would be enticed to invest in Pakistan.

Keywords: foreign capital inflows; political economy; election time; Markov Switching Model; Pakistan (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-7099/11/7/181/pdf (application/pdf)
https://www.mdpi.com/2227-7099/11/7/181/ (text/html)

Related works:
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:gam:jecomi:v:11:y:2023:i:7:p:181-:d:1184669

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().