Impact of Terrorism on Foreign Investment in Pakistan

Abstract

This study inspected and checked the effect of terrorism, consumer price index, exchange rate, and interest rate on overseas investment inflows as a whole in country. Overseas investment includes both Foreign Direct Investment and Foreign Portfolio Investment in flows in the country. The study used 12 years’ time series quarterly data from 2003 to 2014, which is obtained from the central bank website of the country. South Asian Terrorism Portal and International Monterey Fund.The OLS model and multiple regression analysis areappliedthrough Eveiws Software to examine the relationship of the above mentioned variables. TheBreusch-Godfrey Serial Correlation LM Test and Normality Test areapplied to examine the serial correlation, autocorrelation and residuals are normality distributed in the data. All the variables terrorism, CPI, exchange rate and interest rate are significant at 5% level and have positive relationship with foreign investment.Finally the findings show no chance of serial correlation, autocorrelation and residuals are normally distributed.