Impact of FCI on Economic Growth in Pakistan

Mohey-ud-din, Ghulam

doi:10.31384/jisrmsse/2007.05.1.2

Cited by 20 publications

(19 citation statements)

References 6 publications

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“…The impact of foreign inflows on poverty and economic development is found to be controversial in the literature. In some studies positive impact of foreign inflows was proved on poverty and economic development, while other studies highlighted its negative effects [Mohey-ud-din (2006)]. In case of Pakistan there are only few studies on the relationship between inflows and poverty, for example Siddiqui, et al (2006), Zaman, et al (2008) and Mohey-ud-din (2006).…”

Section: Introductionmentioning

confidence: 99%

“…In some studies positive impact of foreign inflows was proved on poverty and economic development, while other studies highlighted its negative effects [Mohey-ud-din (2006)]. In case of Pakistan there are only few studies on the relationship between inflows and poverty, for example Siddiqui, et al (2006), Zaman, et al (2008) and Mohey-ud-din (2006). After thorough literature review and analysis, these authors have explained the relationship between foreign inflows and poverty but none of them have computed the extent of the impact between the two variables.…”

Section: Introductionmentioning

confidence: 99%

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Do Foreign Inflows Benefit Pakistani Poor?

Ali¹,

Nishat

2022

pdr

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Foreign Inflow plays an important role in country’s development. The importance of foreign inflows is not limited to developing countries; developed and emerging economies also attract foreign inflows to supplement their resources to sustain growth. The importance of foreign inflow in Pakistan is very well acknowledged and documented, however the affect of these inflows on poor people of Pakistan remains unanswered. This paper is an attempt to fill this gap by studying the impact of foreign inflows on poverty reduction in Pakistan through the channel of health, education and other indicators related to human development. Our foreign inflow variable consists of Foreign Direct Investment, Remittances and Foreign Assistance. Using ARDL approach to co-integration on time series data for the period 1972 to 2008, we found that foreign inflows as a whole have increased poverty levels in Pakistan. At disaggregated levels, we found that foreign assistance is the major component of inflows which is responsible for the positive relationship between inflows and poverty. We also found positive relationship between poverty and infant mortality and foreign inflows and female enrolment. The relationship suggests that increase in foreign inflows would not only increase poverty but also would increase infant mortality through indirect channel. The impact of inflow on female enrolment was however found to be positive. JEL classification: E00, F20, F21, F34, F35, I30 Keywords: Poverty, Economic Growth, Pakistan, Foreign Capital, Foreign Debt, Aid, Remittances, Foreign Direct Investment

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Do Foreign Inflows Benefit Pakistani Poor?

Ali¹,

Nishat

2022

pdr

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“…On the other hand, Shahbaz and Rahman (2012) concluded in a study that imports play a crucial role between exports and economic growth, and ignoring imports from the analysis can yield misleading results (Mohey-ud-Din, 2007). A large share of imports of developing countries consists of capital and intermediate goods which enter into domestic production; so imports expand the country"s production possibilities.…”

Section: Literature Reviewmentioning

confidence: 99%

Empirical analysis of foreign direct investment and economic growth in Pakistan using VECM model

Ashraf¹,

Shi²,

Afzal³

et al. 2019

Afr. J. Bus. Manage.

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Theoretically Foreign Direct Investment (FDI) is considered as a growth accelerating component that has attained significant heed in the development of the country in the past decade. Pakistan has been selected due to its geostrategic location, which is a major attraction for developed economies to invest in for lucrative returns. This study objective is to trace the long as well short run analysis among FDI, Gross Domestic Product (GDP), Gross National Income (GNI) and Imports (IMP) of Pakistan from year 1987 to 2017 by using the ADF Unit Root Test, Johansan co-integration approach, VECM and Granger causality methods. The results reveal that the two-way causality between FDI and growth in Pakistan is not highly significant. Pakistan's economic growth indeed attracts FDI influx, which supports the market-size hypothesis; while the FDI influx stimulates the economic growth of Pakistan to some degree, the result is not significant. In light of the results achieved, this study suggests future recommendations to policy makers for an effective strategic plan to welcome foreign investments in Pakistan.

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“…The main argument supporting the hypothesis is that sound intermediaries in a proper regulatory framework ends up boosting saving and capital accumulation. Capital formation is the one important determinant of 4 Studies found positive impact of foreign aid on economic growth (Shabir and Mahmood, 1992;Mohey-ud-din, 2006), while others argued that foreign aid inversely impacted Pakistan economic growth (Khan and Ahmed, 2007;Ali, 1993;and Khan and Rahim, 1993;Javed and Qayyum, 2011). 5 Mckinnon (1973) and Shaw (1973), King and Levine (1993), Beck et al, 2000a, Abu-Bader andAbu-Qarn (2008),among others investment and hence of economic growth.…”

Section: Review Of Literaturementioning

confidence: 99%

“…Macroeconomic impact of foreign aid is also controversial in case of Pakistan. A few studies found positive impact of foreign aid on economic growth in case of Pakistan (Shabir and Mahmood, 1992;Mohey-ud-din, 2006).Some studies found that foreign aid inversely affected the economic growth (Ali, 1993;Khan and Rahim, 1993;Ishfaq and Ahmed, 2005;Khan and Ahmed, 2007). Javed and Qayyum (2011) have investigated the role of macroeconomic policy in aid effectiveness in case of Pakistan.…”

Section: Review Of Literaturementioning

confidence: 99%

Foreign Aid and Macroeconomic Performance in Pakistan: Exploring the Role of Local Financial Sector Development

Luqman¹,

Haq²,

Lal³

2013

Forman j. econ. stud

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It is widely recognized that foreign aid may not be used effectively in recipient countries due to a problem of absorptive capacity. This study assesses the role of such capacity in the effective use of foreign aid in Pakistan. To accomplish this, we incorporate domestic financial sector development in our model. The empirical analysis estimates growth equations using time series data of Pakistan over the period 1972-2011. We construct the index of financial sector development using principal component analysis. The ARDL bound testing approach of co-integration was used for empirical analysis. The empirical evidence substantiates the fact that foreign aid is more effective and consequently enhances both long and short run growth process only in the presence of local financial sector development. For instance, our result revealed that absorptive capacity (i.e. interactive term of local financial sector development and foreign aid) is positive and statistically significant. The findings support the claim that 'local financial sector development plays an important role in the effectiveness of foreign aid'. In addition, the results indicate that foreign aid makes a positive and statistically significant impact on economic growth after allowing nonlinearity between the variables; this, in turn, indicates diminishing return to foreign aid in case of the Pakistan. Our control variables i.e., physical capital and human capital bear their expected positive signs and are also statistically significant. This indicates that physical capital and human capital also play an important role in the log-run economic growth process of Pakistan.

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Impact of FCI on Economic Growth in Pakistan

Cited by 20 publications

References 6 publications

Do Foreign Inflows Benefit Pakistani Poor?

Do Foreign Inflows Benefit Pakistani Poor?

Empirical analysis of foreign direct investment and economic growth in Pakistan using VECM model

Foreign Aid and Macroeconomic Performance in Pakistan: Exploring the Role of Local Financial Sector Development

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