The Impact of Inflation and Exchange Rate Uncertainty on Foreign Portfolio Investment ANF Foreign Direct Investment in Pakistan

Abstract

Purpose- This study aims to investigate the effect of inflation and exchange rate uncertainty on Foreign Portfolio Investment and Foreign Direct Investment in Pakistan. Data and methodology-Time series data has been taken from 1989-2018. In order to know the long term relationship, methodology of regression is applied. Results- The results clearly indicate that inflation has a significant negative impact on FPI, whereas Forex has significant positive impact on FPI, which shows that increasing forex brings FPI in Pakistan and an increase in inflation discourages FPI. In case of FDI, forex impacts significantly negative and whereas inflation affects significantly positive on FDI. Conclusion- This shows that the Increase in forex results in discouraged FDI whereas an increasing in inflation encourages FDI in Pakistan. This study has various academic, practical, policy and future Implications.