Read Microsoft Word - Somia Iram.doc text version

Sector level analysis of FDI-growth nexus: A Case Study of Pakistan Somia Iram* Muhammad Nishat**


Pakistan being a capital scarce economy has adopted the liberal policies to attract foreign capital in the present decade and has attracted considerable amount of FDI yet the direction of FDI inflow has changed from traditional manufacturing sector towards the services sector. In this regard we investigate that whether changing composition and direction of Foreign Direct Investment (FDI) is contributing to growth at aggregate as well as disaggregates level. Moreover whether sectoral heterogeneity counts while regarding the effects of foreign direct investment on growth while adopting the privatization policy? In order to investigate the order of integration panel unit root tests Im, Pesaran and Shin and Levine, Lin and Chu have been utilized. For the investigation of long run and short run relationship Panel Autoregressive distributed lag model (ARDL) and Error correction method (ECM) have been used respectively. To further analyze the role of privatization policy interaction term has been introduced. Overall results of FDI-growth nexus are showing that at aggregate level FDI positively affect growth. Contribution of FDI to the growth of manufacturing (real sector) and services sector (nominal sector) in the presence of privatization over the period of 19722008 is also significant yet the magnitude of services sector FDI to growth is more than manufacturing sector FDI. The result of this provides coherent and sound policy recommendations for further policy adaptation at sector level. Key Words: Foreign Direct Investment, Economic growth, Manufacturing sector, Service sector, Panel Cointegration, JEL Classification: F23, F36, F43, C33

* Corresponding Author, Economist at Applied Economics Research Centre (AERC) University of Karachi. Postal address: Applied Economics Research Centre (AERC) University of Karachi. Karachi75270. Pakistan. Email: [email protected] ** Professor of Business and Finance at Institute of Business Administration (IBA). Postal address: IBA, Main Campus, University Road ,Karachi Email: [email protected]


1. Introduction:

Economic growth is the indicator of the health of economy. In the current decade growth of Pakistan economy has gone considerable changes and regarding these changes Pakistan has adopted different policies concerning different sectors of economy.

As Composition of Sector wise share is important. In the current scenario performance of industrial sector is very dismal with the decelerating growth rate. Here in the 2008-09 it is clear that agriculture contribution has increased about 50.1% whereas manufacturing sector growth has decelerated by 46.1% and services sector share to GDP is also declining with very rapid pace Table 1: Sector wise contribution to the GDP growth (%) Sectors 2006-07 2007-08 2008-09 Agriculture 0.9 0.24 1.00 Manufacturing 1.6 0.91 -0.64 Services 6.8 4.10 2.00 Source: Economic survey of Pakistan. (For fig see appendix) So in order to overcome these economic situations effectively and efficiently government has taken several steps. On of theses measures is the adaptation of highly liberalized policies to attract most needed financial capital along with its spillovers. FDI is viewed as a way to transfer knowledge, promote managerial skills, bring in technology spillovers, and argument human capital along with most needed financial capital. Consequently, FDI stimulates economic growth in host countries. For a


developing nation with less capital at home, it is imperative to attract foreign capital to multiply its existing production capabilities. Pakistan, capital scarce economy, along with worsening law and order condition and huge political instability has emphasized on polices such as liberalization and privatization in order to attract capital inflow. Although Pakistan has started attracting FDI after the two years of its inception 1947 but the inflow was not much higher, may be due to inconsistent policies to attract FDI inflow. Unfortunately, in case of Pakistan a number of factors such as lack of political instability, unsatisfactory law and order situation, the macroeconomic imbalances and the slowing down of economic activities together with inconsistent economic policies discouraged foreign investors to increase their participation in Pakistan (Khan, 1997). Increasing global financial requirement has provoked the importance of foreign direct investment as a growth stimulating component of foreign capital flows. In order to attract this beneficial capital flows many countries gone through policy changes. By adopting such policies Pakistan is also able to attract a relatively improved FDI inflow but that inflow remains concentrated in services sector (transport storage and communication, financial business). Changing patterns of sectoral composition of FDI matters a lot to the growth of economy, because FDI is considered as subway for the technology, knowledge and managerial skills from developed countries towards the developing countries working through different motives (Dunning, 1993) but this concept is controversial whether this transfer of qualities is favorable or not because foreign direct investment posses both growth augmenting as well as growth retarding effects. This controversial issue is needed to investigate that if FDI possess both growth retarding as well as growth enhancing components whether they are homogenous across sectors and what factors are responsible for inward FDI flow at disaggregate level. The main objective of this paper is to explore "whether sectoral heterogeneity counts while regarding the effects of foreign direct investment on growth or not. If yes than in which sector FDI is contributing more efficiently. Moreover is privatization policy helping to improve the FDI growth relationship? Our paper contributes to the existing literature on FDI-growth nexus through different channels. Following Vu and Noy (2007), this research is also a case study of single country based regression that disallow regional as well as cross country disparities which


has made the analysis transparent and easier. Moreover, to the best of our knowledge, our paper is the first attempt to use data of sectors for examining the sectoral differences in the impact of FDI on economic growth in case of Pakistan. Furthermore, our finding has justified an important economic question "whether the impact of FDI on growth is similar across sectors or not" Finally the result of this research has provided the sound policy measures that in which sectors government should undertake policy reforms in order to enhance growth or should government further privatize or not?.. This research is policy oriented research regarding the liberalization and privatization and helpful for further policy improvements. This paper is organized in to following sections: section II comprise of literature review Section III regards the data, model and methodology; section IV contains results and conclusion whereas last section is of policy recommendation.


2. Literature Review: The major concern of the most research, all over the world revolves around the issue of economic growth working through different channels. Almost all the growth theories working through different channels reach the same conclusion that capital is necessary to enhance the productivity. Though a lot of work has been done on the FDI-growth nexus yet, this issue is still controversial "whether the FDI exerts positive influence on the growth or not?" On theoretical grounds, endogenous growth theories as well as neoclassical growth theories all support the positive impact of capital (FDI) on growth. But the result are ambiguous on empirical level the results are still inconclusive. Perhaps because of heterogeneity across regions as well as across sectors. Foreign direct investment serves as catalyst to enhance the domestic production and investment capabilities, intensify competition and accelerate technological change that in turn fuel and foster the economic growth. Even after conducting vast body of empirical research the impact of FDI on growth is countervailing. There is no definite conclusion since now. Some early studies (singer, 1950; Griffin, 1970) recognized the negative impact of FDI on growth in developing countries. Aitkin and Harrison's (1999) in case of Venezuela, Jhon and Athanasios (2004) in case of US and Western European countries, and Katerina et al (2004) in case of transition countries found that FDI do not significantly affect economic growth, while Blomstrom et al. (1992), Caves, (1974) and Kokko, (1994) showed a positive influence of FDI inflows on economic growth. Findlay (1978) highlighted the positive effect through technology spillovers that have the strongest potential to enhance economic growth in the host country. According to Chudnovsky and Lopez (1998) Foreign direct investment may boost growth through the improvement of manufacturing export and improved balance of payment but in the long run due to the control of foreigners over the local production resources profit outflow (divided, Royalty fee), deteriorate the balance of payment condition. Atiq et al (2004) found the effect of FDI on growth of Pakistan economy and found that FDI enhance growth under the export promotion regime. Zhang (2006) conducted study on Chinese economy for the period of 1992-2004 by using panel co integration technique


suggests that FDI seems to promote income growth and this positive effect seems to rise over time. In case of developing countries FDI mostly work through the channel of externalities (positive & negative) but there is no definite conclusion related to spillovers of FDI. Benefits and cost associated with foreign direct investment is not disseminated homogenously across all countries and even across all sectors but it depend on the local condition of the host economy. That's why different countries, regions and even sectors react differently to same FDI inflow. Borensztein et al (1998), Xu (2000), and Alfaro et al. (2003) suggested the positive impact of FDI in presence of the sound educational level, development of local financial markets, and other necessary conditions to absorb spillovers. Blomstrom and Kokko (2003) explained that positive impacts of FDI are not automatic but the local conditions influence firms' adoption of foreign technologies and skills. Borensztein (1995, 1998) explained the growth enhancing effect of FDI through the channel of technology. But the necessary condition for technology spillovers is at least threshold level of initial human capital. Romar (1986 &1990), Helpman and Grossman (1990) emphasized the importance of knowledge capital, coming through research and development in the long run economic growth. Bengoa and Robles (2003) found that FDI exert positive impact on economic growth in Latin America only when host countries had adequate human capital, economic stability, and liberalized markets. Wang and Wong (2004) indicated that FDI promotes economic growth only when host countries have an adequate level of human capital. Karkovic and Levine (2002) explained that FDI do not exert an independent influence on economic growth, sound domestic policies may super both growth and FDI. Dhakal et al (2007) analyzed the existence and nature of the causal relationship revealed that FDI-to-growth causality is strengthened by the presence of greater trade openness, more limited rule of law, lower receipts of aid, and lower income level of the host country. Growth-to-FDI causality, on the other hand, is reinforced by greater political rights. Yi and Chiang (2008) find out the effect of FDI on economic growth using the data of 62 countries and found that FDI has positive impact only when host country has better condition of initial GDP and human capital. Policy reforms play an important role to ensure the economic effect of FDI.


It may seem ordinary to argue that foreign direct investment (FDI) can convey great advantages to the economic growth of host countries especially for developing economies but it has been also observed that productivity effect of FDI is not similar across different sectors in the same economy. The FDI linkages can vary across industries and spillovers are not similar in all industries because foreign companies sometimes operate in "enclaves" that offer little scope for the local economy to be benefited (Kokko, 1994). Inward FDI flow affects the sum of factor prices and technology depending on the absorptive capacity available in the sector and also induces the affect of skilled workers bias toward different sectors (Te velde, 2001). Sector specific FDI inflow contributes significantly in China and Vietnam by enhancing the labor productivity but manufacturing sector appear to gain more than other sectors from sector specific FDI (Vu et al, 2001). Alfardo (2003) examined the effect of foreign direct investment on growth in the primary, manufacturing, and services sectors and Suggested that total FDI exerts an ambiguous effect on growth. Foreign direct investments in the primary sector, however, tend to have a negative effect on growth, while investment in manufacturing a positive one. Evidence from the service sector is ambiguous. Zaman et al (2008) investigated the factors effecting FDI in case of Pakistan using time series on the data set of period ranging from 1971-2003, and found that variable used for market size and trade balance are significant where as variable used for service sector has negative effect on the growth of economy. FDI being an investment financing source is very important for the country because it can help to reduce poverty, generate employment and improves macroeconomic indicators for the attainment of higher economic growth rates. FDI not only allows overcoming the financing and liquidity constraints, but also provide new capital, allowing additional investment in both human and physical capital, which can be very beneficial for developing countries. Capital inflow not only brings technology spillovers but also increases the job opportunities as well as changes the job structure across sectors (Mickiewicz, 2000; Ender wick, 1996 and Hunya, 1998). To the best of my knowledge in case of Pakistan only few studies have investigated FDIgrowth nexus under different regimes. Atiq et al (2004) in case of Pakistan and Ozturk and Kalyoncu (2007) in case of Turkey and Pakistan empirically investigate the impact of


FDI on economic growth and found that FDI positive effect economic growth. This study is first attempt to investigate the FDI-growth relationship at sector level in case of Pakistan.

3. Data and Model Specification:

To estimate the relationship between FDI and economic growth at sector level, the model is given below: YIt = o+ 1FDIIt +

2INVIt + 3INFit +

3DUM it + µ ................. (1)

Where Y represents the GDP growth rate, FDI represents Foreign Direct Investment, INV is for investment and INF represents Inflation, i represent number of sectors and t represents time period (1972-2008). The Dummy of privatization is also included in this model due to its significance. Following Alfaro (2003), we include FDI of primary, manufacturing and service sector in the growth equation. The empirical model used in this paper is given as:

Yt = do+ 1PFDIt + d2MFDIt + d3FDIt+ d4Xt + µ ................. (2a) Yt = o+ 2SFDIt +

3FDIt+ 4Xt +

µ ............... ................. (2b) .

PFDI and SPFDI represent FDI in manufacturing and service sectors. We utilized a balanced panel of two sectors namely manufacturing, and the service sector. The service sector includes Transport storage, communication, trade and commerce. The time period of this study is ranging from 1972 to 2008. Data used in this paper is obtained from the electronic database of International financial statistics (IFS), Annual report state bank of Pakistan as well as from world Investment report. Only selective sectors are chosen for the sample because of the unavailability of data incase of Pakistan.



Panel Unit Root Tests:

Levin, Lin, and Chu and Im, Pesaran, and Shin panel unit root test tests have been used in this study. 3.3. Testing The Long Run Relationship:

We use the robust technique Autoregressive Distributed Lag model (ARDL) introduced by Pesaran, Pesaran and Smith (1998), Pesaran and Shin (1999) and Pesaran et al (2001). The error correction version of ARDL model is given below for the above given equation 1.

p p p p


1 i ,t 1


i 1

Yi ,t




i 1 3

FDI i ,t

1 3



i 1

INVi ,t



i 1

INFi ,t




FDI i ,t

INVi ,t

INFi ,t 1µ it ......................(3)



component and µ trend is the error term. The term with summation sign

represent the short run dynamics. While the second part of the equation represent the long run dynamics. In order to estimate the long run coefficients, the following long-run model will be estimated:

p p i p i p i


1 Yi,t

i 1

2 FDI,t i

i 1

3 INVt i,

i 1

3 INFt i,

i 1




After finding the long run relation we use the following equation to estimate the short run coefficients:

p p p p



i 1

Yit i


i 1

FDIit i


i 1

INVt i


i 1

INFit i

ECit i


is the error correction term in the model indicates the pace of adjustment reverse to long


4: Estimation results: 3.1. Testing of the Panel unit root hypothesis A summary of the results of Im, Pesaran and Shin W-Stat (IPS) and Levin, Lin & Chu tStat (LLC) is given below. Table 2 : Panel Unit-Root Test Estimation Variables Im, Pesaran and Shin (W-Stat) Level Y FDI INV INF 0.23 -4.74* -5.57* -4.85* First Difference -4.22* -10.10* -12.18* -14.83* Levin, Lin & Chu (t-Stat) Level -0.58 -6.15* 0.09 -3.51* First Difference -3.93* -9.35* -3.09* -13.77

Notes: * Represents significant only at 1%, ** Represents significant only at 1%.

From the results of unit root tests, it is apparent that the variables have different order of integration. In the next step, we proceed to apply the ARDL approach. 3.2. Panel Autoregressive distributed Lag model (ARDL) Lag selection: The first step of bound testing approach is to select the order of the lag length. On the basis of lag length, we found the F statistics value. The estimated F value selected on the basis of lag length is given below:


Table 3 : Lag length Selection & Bound Testing for panel Co integration lags Order 1 2 AIC 17.23 17.18* HQ 17.49 17.37 SBC 17.62* 17.94 F-test Statistics 1.54 3.26**

Short-run Diagnostic Test-Statistics Serial correlation LM, F = 0.34 (0.51) Hetroscdasicity test F= 2.01 (0.42) Ramsey RESET test F= 0.39 (0.29) Normality J-B value = 19.02 (0.06)

* Significant at 5% level according to Pesaran et al (2001) & Narayan P (2005)1 The results show that F statistics is significant at 1% level. The significant F value indicates that there is co integration among the variables. After finding a long run relation relationship we estimate the long run and short run parameters Table4: Long Run Results using the Panel ARDL Approach Dependent Variable Yit Variables FDIt INVIt INFIt FDIt*DUM Adjusted R2 = 0.95 ARDL order (2, 1, 1, 2) Coefficient 0.68 (0.05) 0.32 (0.09) 0.34 (0.05) 0.95 (0.02) F-statistics = 25.03 (0.01)

The values in brackets ( ) are the probability values.

The results of the table 4 show that all variables are significant and have expected signs. The positive coefficient of FDI show that the sector wise growth is largely depends on


Critical values are obtained from Pesaran et al (2001) and Narayan P (2005).


inward flow of FDI. However, it is apparent from the results that FDI inflow contributes to economic growth mainly when the economy practices the privatization. The reason behind this result is that privatization policy in most countries has proved to be investor's friendly. Moreover, privatization reduces the management bottlenecks. Privatization policy enhances the efficiency by introducing new and advance management practices. The sign of private investment (Excluding foreign investment) is positive and significant at 5 % level of significance. This is depicting the positive affect of private sector participation. As expected, Inflation rate negatively affect economic growth. This is because when there is an increase in inflation the real income of the people decrease moreover cost of doing business increases that not only retards capital inflow but also decelerate the economic growth. In order to find out the individual significance of manufacturing and service sector, we estimate the long run relationship by using the model 2 (A) and 2 (B). The results are given in table below: Table 5: The Long run Results Estimated Long Run Coefficients using the ARDL Approach

Dependent Variable Y


Coefficient ARDL (1,1, 2, 2)

Coefficient ARDL (1,1, 2, 1) --0.56 (0.01) -0.68 (0.08) 0.48 (0.09)

MFDI SFDI INF INV R2 = 0.98 Adjusted R2 = 0.96 F-statistics = 26.08 (0.00) Dh Stat = 1.92

0.37 (0.06) ---0.68 (0.08) 0.48 (0.09)

The values in brackets ( ) are the probability values.


The results show that FDI inflow in the service sector accelerates economic growth by a high speed. FDI inflow in the manufacturing sector significantly affects economic growth. However, the magnitude of SFDI is much greater than MFDI. In case of Pakistan both services as well as manufacturing sectors are contributing but services sector is contributing much more than manufacturing sector perhaps because high speed of job creation. In the current decade major surge of foreign direct investment was toward the telecommunication sector that has strengthened the infrastructure as well as increased job potential and in return caused increased contribution to economic growth.

Table 6: Error correction representation of Panel ARDL model Dependent Variable Yit Variables FDIt INVIt INFIt CE(-1) Adjusted R2 = 0.89 ARDL order (2, 1, 1, 2) Coefficient 0.23 (0.16) 0.26 (0.08) 0.81 (0.03) -0.39 (0.08) F-statistics = 20.03 (0.01)

The sign of estimated lagged error correction term ECt-1 is negative and significant at 8 percent level of significance. There is 39 percent speed of adjustment towards long run equilibrium. In the short run FDI do not significantly affect economic growth. In the case of developing countries FDI is important because of its spillover affects that are not instantaneous rather time consuming that's why FDI do not contributes the growth in the short run but it takes time to influence the growth patterns of economy. Inflation and private investment significantly affect economic growth in the short run as well. The sign of inflation is positive in the short run. This is due to the fact that increase in the prices


increases the profit margin of the producers in the short run. However, in the long run due to decreased real income of the general masses, economic growth hampers.

4. Conclusion and policy recomandations: This paper investigates the FDI growth nexus at sector level over the period of 1972 2008. in order to find out the order of integration, we used Im, Pesaran and Shin W-Stat (IPS) and Levin, Lin & Chu t-Stat (LLC) panel unit root tests. Autoregressive distributed lag model (ARDL) to co integration test is used for the robustness of long-run relationship between the variables. We found that in the long run FDI significantly affect economic growth. However, in the short run, FDI do not significantly affect economic growth. Moreover the magnitude of services sector FDI is greater than manufacturing sector FDI. While the variable of inflation that is used as control variable is affecting the economic growth significantly both in long run as well as in short run. The sign of inflation is positive in the short run. This is due to the fact that an increase in the prices increases the profit margin of the producers in the short run. However, in the long run due to decreased real income of the general masses, economic growth hampers. Private investment is also helping in boosting the economic growth. In the presence of privatization policy foreign direct investment both in services as well as manufacturing sector is contributing to growth. As privatization policy adopted in the current decade has not only increased FDI inflow towards Pakistan but also contributed to economic growth. Yet this contribution is more in services sector as compared to manufacturing sector. In this regard government should pay proper attention to strengthen manufacturing sector that is real sector of economy. In case of services sector government should attract foreign direct investment toward infrastructure base services sector so that it may help to contribute the growth of manufacturing sector in the long run. Foreign direct investment should be encouraged to amplify economic growth, to amplify benefit of innovative technology to curtail poverty and unemployment, to lift up living standards but at the mean time proper attention should also be paid to save sovereignty and profit outflow of the country.



Aitken, B and A. E. Harrison (1999), "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review 89(3), June pp. 605-618. Alfaro, L. (2003), Foreign Direct Investment and Growth: Does the Sector Matter? Harvard Business School, Boston, MA, mimeo. Atique, Z., Ahmad, M. H., Azhar, U. (2004), The impact of FDI on economic growth under foreign trade regimes: A case study of Pakistan, Pakistan Development Review, 43(4). Blomström, M., Lipsey, R.E. and Zejan, M., (1994), "What explains developing country growth?" NBER Working Paper No. 4132. Borensztein, E., J. De Gregorio, and J.W. Lee., (1998), "How does foreign direct investment affect economic growth?", Journal of International Economics, 1(45): 115135. Bengoa, M. and Sanchez-Robles, B. (2003), "Foreign direct investment, economic freedom and growth: new evidence from Latin America", European Journal of Political Economy, 19(3): 529-543. Blomström, M. and Kokko, A., (2003), "Human Capital and Inward FDI." , EIJS Working Paper Series. No 167, The European Institute of Japanese Studies. Borensztein, E., J. De Gregorio, and J.W. Lee., (1998), "How does foreign direct investment affect economic growth?", Journal of International Economics, 1(45): 115 Baltagi, Badi H (2005), Econometric Analysis of Panel Data (3rd edition), Chichester, UK: John Wiley & Sons Carkovic, M. and R.Levine. (2002), "Does Foreign Direct Investment Accelerate Economic Growth?" University of Minnesota, Working Paper .


Caves, R., (1974), "Multinational Firms, Competition and Productivity in Host-Country Markets", Economica 41(162): 176-93. Dunning, J. H., (1993), "Multinational Enterprises and the Global Economy, New York: Addison-Wesley. Dhakal, D., Franklin, M. and Upadhyaya, K., (2007), "Foreign direct investment and transition economies: empirical evidence from a panel data estimator", Economics Bulletin, 6(33): 1-9. Enderwick, P., Akoorie, M. (1996), Fast Forward: New Zealand Business in World Markets, Longman Paul, Auckland., . Findlay, R.., (1978), "Relative Backwardness, Direct Foreign Investment and The Transfer of Technology: A Simple Dynamic Model", Quarterly Journal of Economics, 62(1): 1­16. Grossman, G. and Helpman, E., (1990), "Innovation and Growth in the Global Economy", MIT press, Cambridge, MA. Griffin, K. B., (1970), "Foreign Capital, Domestic Savings and Development", Oxford Bulletin of Economics and Statistics, 32: 99-112. Pesaran, H. M. (1997), "The role of economic theory in modeling the long-run", Economic Journal, 107, 178-191. Pesaran, H. M. and Y. Shin. (1995), "Autoregressive distributed lag modeling approach to cointegration analysis", DAE Working Paper Series, No. 9514, Department of Economics, University of Cambridge. Pesaran, H. M. and Y. Shin. (1998) "An Autoregressive distributed lag modeling approach to cointegration analysis, in: S. Storm, ed". Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press. Pesaran, M. H., Y. Shin and R. Smith. (1996), "Testing for the existence of a long-run relationship", DAE Working Papers 9622, Department of Applied Economics, university of Cambridge. Pesaran, M.H., Y. Shin, and Smith, R. (2001), `Bound Testing Approaches to the Analysis of Level Relationships'. Journal of Applied Econometrics, 16, 289-326.


Singer, H.W., (1950), "The Distribution of Gains Between Investing and Borrowing Countries", American Economic Review, 40: 473-485. Hunya, G., (1998), "Integration of CEEC manufacturing into the European corporate structures by direct investments", MOSTMOCT, No 1. Hunya, G., (1998), "Relationship between FDI, Privatisation and Structural Change in CEECS", Paper Prepared For the Conference On Privatisation, Corporate Governance and the Emergence of Markets in Central Eastern Europe, FIT, Berlin, May 22-23, mimeo. International Monetary Fund, International Financial Statistics, various issues. Washington, D.C.: IMF. Im, K., M. H. Pesaran and Y. Shin (2003), "Testing for Unit Roots in Heterogeneous Panels", Journal of Econometrics, 115 (1): 53-74. Romer, P., (1986), "Increasing Returns and Long-Run Growth", Journal of Political Economy 94: 1002-1037. Katherina, L., Jhon, P. and Athanasios, V., (2004), "Foreign Direct Investment and Economic Growth In Transition Economies", 1: 97-110 Khan, A. H., (1997), "FDI in Pakistan: Policies and Trends", The Pakistan Development Review, 36(4): 959­985 Kokko, A., (1994), "Technology, market characteristics and spillovers", Journal of Development Economics, 43: 279­93. Levin, A., C.F. Lin and C. Chu, (2002), Unit root tests in panel data: Asymptotic and finite-sample properties. J. Economet., 108: 1­24 Te Velde, D. W., (2001), "Policieas Towards Foreign Direct Investment In Developing Countries: Emerging Best-Practices And Outstanding Issues", ODI,working paper. UNCTAD. World Investment Report, various issues. New York: UNCTAD. Ozturk, I. and Kalyoncu, H., (2007), "Foreign Direct Investment And Growth: An Emprical Investigation Based On Cross Country Comparison", Econimia Internazionale, 60(1). Wang, J. Y. and Blomstorm, M. B.,(1992), "Foreign Investment And Technology Transfer: A simple Model", European Economic Review, 36: 137-155


Xu, B., (2000), "Multinational Enterprises, Technology Diffusion, And Host Country Productivity Growth", Journal of Development Economics, 62: 477-493. Zhang , K. H., (2006), "FDI and Economic Growth in China: A Panel Data Study of 1992-2004. Zaman, K. Shunaila, H. and Awan, Z., (2006), "Economic Determinants of Foreign Direct Investment in Pakistan",


Appendix: Trends of FDI in Pakistan

2 1.5



0.5 0 year 197419781982198619901994199820022006 years

FDI as % of GDP

Sector wise contribution to the GDP growth (%)



Microsoft Word - Somia Iram.doc

19 pages

Report File (DMCA)

Our content is added by our users. We aim to remove reported files within 1 working day. Please use this link to notify us:

Report this file as copyright or inappropriate


You might also be interested in

Microsoft Word - Telecom-pak.doc
Microsoft Word - Book071127-Internationalization of IFI's.doc
Empowering Women Is Smart Economics -- Finance & Development March 2012