Antecedent of Foreign Direct Investment in Developing Countries: Evidence from Pakistan

Abstract

The proposed present research study estimates the role of foreign direct investment in developing economies. This research study also determines the factors affecting foreign direct investment in developing countries. For this key purpose, we have collected time-series data from the official website of world development indicators, Pak economic survey & the state bank of Pakistan since 1981 to 2019. The autoregressive distributive lag model has been applied to evaluate the association among the variables. Afterward, the bond test has also been utilized to estimate the long-run relationships between dependent and predicted variables. The results indicate that there is a significant relationship between gross domestic product growth and the trade deficit with foreign direct investment. Moreover, there has neither a positive nor negative association of the real rate of interest and tax rate with foreign direct investment. The current research study concludes that foreign direct investment inflows are significantly promoting developing economies.