Foreign Direct Investment, Exports, and Domestic Output in Pakistan

Abstract

The impact of the policy reform on economic performance has been one of the stifling issues in development economics in the recent years. Since the middle 1970s, there has been considerable progress in the trade reform in the most developing countries, turning from an import substitution strategy to export-oriented approach. Pakistan also follows export-oriented policies. Pakistan’s trade pattern and trade policy have been moving towards fewer and fewer controls, tariffs rates have come tumbling down. Export-led-growth hypothesis (ELG) suggests that due to positive correlation between export and growth, therefore, export-oriented policies contribute to economic growth. Thus, international trade and development theory suggests that export growth contributes positively to economic growth. On the basis of this framework, most empirical work on the effects of export promoting strategy followed in developing countries evaluated openness with trade. Empirical research about the effect of this liberalisation process has treated export as principal channel for growth. The relationship with exports and growth, grounded in endogenous growth theory, has been tested for Pakistan [Khan (1995); Ahmad, Butt, and Alam (2000) and Akbar (2000)].

Influence of Foreign Direct Investment on Gross Domestic Product; an Empirical Study of Pakistan

“…Trade can play vital role in the development of countries (Agrawal, 2000). In the development of economic growth of a country, government policy is not only key factor by which it can attract foreign capital but also export promotion startegy is important (Ahmad et al, 2003).…”

The Dynamic of Financial Development, Imports, Foreign Direct Investment and Economic Growth: Cointegration and Causality Analysis in Pakistan

“…Besides, direct effect of savings on capital accumulation, better savings mobilization can improve resource allocation and boost technological innovation [Cotton and Ramachandran (2001);Maureen, (2001);Omran and Bolbol (2003); Ahmad, Alam and Butt, (2004);Alfro et al, (2004)]. Several country specific studies carried out to investigate the results of spillover effects of FDI on economic growth.…”

“…Finally, investment in new sectors in host country can spur the growth of new industry and new products [Ramachandran and Shah, (1999), Cotton and Ramachandran, (2001) and Naveed and Shabeer, (2006)]. Besides, as inflow of foreign capital and resource creates backward and forward linkages and multinationals corporations (MNCs) contribute technical help to promote the domestic firms, it is expected that, the level of technology and productivity (through both labor and capital) of domestic producers will increase [Lim and Sidall (1997), Zhang (2001), Ahmad et al (2004)]. …”

The Determinants of Foreign Direct Investment in Iran: Bounds Testing Approach

“…Lim (2001), studies the causality relationship between FDI and its determinants, and …nds that market size, infrastructure quality, openness and labor cost are important for FDI. Ahmed et al (2003), have applied Granger,s concept of causality on the data for the time period of 1972-2000, to examine the e¤ect of export, domestic output and exchange rate on in ‡ow of FDI in Pakistan. They conclude that export and exchange rate are e¤ective factors on Pakistan's FDI.…”