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Impact of Government Expenditure on the attraction of FDI in Pakistan

Nida Shah () and Yaseen Iqbal
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Yaseen Iqbal: Department of Management Sciences, IQRA University Karachi-75300, Pakistan.

International Journal of Economics and Empirical Research (IJEER), 2016, vol. 4, issue 4, 212-219

Abstract: Purpose: This study attempts to investigate the impact of government’s expenditure on the attraction of FDI in Pakistan by using annual time series data over the period 1972-2013. Government’s health expenditure, development expenditure, defense expenditure and education expenditure are taken as independent variables and foreign direct investment (FDI) used as dependent variable. Methodology: Phillips–Perron test, cointegration test, Granger causality test, ordinary least square method has been used to identify the relationship. Findings: The result suggests that government’s health, education and development expenditure have a significant positive long run relationship with the FDI, but the defense expenditure has a negative relationship with FDI. Recommendations: It is recommended tocreate a business friendly environment with investors the government should spend more on health, education and development sector, and especially concentrated on spending the right direction to achieve goals and objective.

Keywords: FDI; Government Expenditure; Development Expenditure; Pakistan (search for similar items in EconPapers)
JEL-codes: E10 (search for similar items in EconPapers)
Date: 2016
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International Journal of Economics and Empirical Research (IJEER) is currently edited by Dr. Muhammad Shahbaz (PhD Applied Economics)

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