The Determinants of Foreign Direct Investment in Pakistan: An Econometric Analysis

Abstract

This study contributes to an understanding of locational determinants of FDI in Pakistan. Although there exists a great deal of literature in this area, there is hardly any evidence of such a study in the case of Pakistan. Economy level analyses are carried out to explore the determinants of FDI through multivariate regression analysis. The results of the multivariate regression analyses reveal that market size, relative interest rates and exchange rates are the major determinants of FDI in Pakistan. The variables such as market growth and political instability were consistently insignificant in the analyses. However, mixed findings were revealed by the variables such as consumer goods imports and the political regime in Pakistan.