DETERMINENTS OF FOREIGN DIRECT INVESTMENT IN PAKISTAN AND INDIA: A CO-INTEGRATION ANALYSIS

Abstract

This study investigates the impact of Foreign Direct Investment on Unemployment, Exports and Imports, Political violence, Tax Revenue, in two South Asian countries (Pakistan and India) using a panel data framework. The period for the study is 1976-2017 for variable foreign Direct Investment, Export, Import and Tax Revenue. And for Unemployment and Political Violence from 1991-2017. The World Bank Development Indicators and Global terrorism database is used. First we check the stationery and apply unit root test. All variables are Stationery at 2^nd difference. After checking the stationary, we estimate panel least square test and imports, exports and un-employment has a positive and significant effect on FDI. Uni-directional relationship between Foreign Direct Investment (FDI) on imports, Political violence on Foreign Direct Investment (FDI), Tax on Foreign Direct Investment (FDI) and exports on imports and Bi-directional relation exist on un-employment on Foreign Direct Investment (FDI), Foreign Direct Investment (FDI) on un-employment, Political violence on Imports, Imports on Political Violence, Tax Revenue on imports, Imports on Tax Revenue, Un-Employment on imports, Imports on Un-employment, Political violence on exports , exports on Political violence, Tax on exports, exports on Tax, Un-Employment on exports, exports on Un-Employment, Un-Employment on Political violence, Political violence on Un-Employment, Un-Employment on Tax, Tax on Un-Employment.

There is Short Run relationship exists between Export, Tax Revenue and Un-employment on Foreign Direct Investment. There is also long run relationship between un-employment, Political violence, tax Revenue, imports, and exports on Foreign Direct Investment.