Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis

Muhammad Khan and Shujaat Ali Khan
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Shujaat Ali Khan: Middlebury College, USA.

No 2011:67, PIDE-Working Papers from Pakistan Institute of Development Economics

Abstract: This paper establishes an empirical relationship between industry -specific foreign direct investment (FDI) and output under the framework of Granger causality and panel cointegration for Pakistan over the period 1981-2008. The result supports th e evidence of panel cointegration between FDI and output. FDI has a positive effect on output in the long run. The result also supports the evidence of long-run causality running from GDP to FDI, while in the short run, the evidence of two-way causality between FDI and GDP is identified. At the sectoral level, the effects of FDI on growth vary significantly across sectors. The most striking result obtained is that FDI causes growth in the primary and services sectors, while growth causes FDI in the manufacturing sector.

Keywords: FDI; Growth; Cointegration; Causality (search for similar items in EconPapers)
JEL-codes: C33 F23 O40 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2011
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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https://www.pide.org.pk/pdf/Working%20Paper/WorkingPaper-67.pdf First Version, 2011 (application/pdf)

Related works:
Working Paper: Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pid:wpaper:2011:67

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