Does the Institutional Quality Matter to Attract the Foreign Direct Investment? An Empirical Investigation for Pakistan

Mohsin Ahmad and Masood Qazi ()

South Asia Economic Journal, 2014, vol. 15, issue 1, 55-70

Abstract: This study investigates the role of the institutions as a determinant of foreign direct investment (FDI) in the case of Pakistan by applying the autoregressive distributed lag (ARDL) cointegration technique. The results demonstrate that the institutional quality exerts long-run impact in determining the FDI inflows. The findings suggest that institutional quality is an important determinant of the FDI in Pakistan. The joint impact of institutional quality and trade openness is also significant and positively contribute to attract FDI in the short run as well as in the long run. The findings strongly support the hypothesis that simultaneous implementation of policy mix, that is, reducing trade barriers and improvement in institutional quality, play significant role in attracting FDI in a developing country like Pakistan.

Keywords: Foreign direct investment; institutions; ARDL approach; Pakistan (search for similar items in EconPapers)
JEL-codes: C22 F21 O43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:soueco:v:15:y:2014:i:1:p:55-70

DOI: 10.1177/1391561414525708

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