Impact of key economic determinants on FDI inflow in Pakistan

Abstract

For the purpose of gaining stability and higher benefits, nations have been allowing others to invest in their countries or looking for the major areas of concerns where profitable investments can be made by the organisations in another country. This research work has been conducted to identify the economic determinants of FDI and evaluate the impact of economic determinants on the FDI inflow in Pakistan. Due to globalisation and the internationalisation of the business operations carried by an organisation, there has been a significant increase in the foreign direct investments by the companies. This increase in the foreign investments is mainly for the sake of gaining competitive advantage and minimising the adverse business situations. The researcher from the existing sources identified that market size, wage rate, domestic investment, trade openness, exchange rate, infrastructure, FDI policies, taxes, inflation, official development assistance government consumptions and business facilitation are the important economic determinants of FDI. The research conducted a research and collected secondary data from the previously done researches on the economic determinants of FDI and found that market size, wage rate and infrastructure has significant positive impact on the FDI in Pakistan, trade openness and exchange rate have a highly significant positive relationship with FDI, inflation and government consumption have a statistically significant impact on FDI while taxes negatively affect the FDI in Pakistan.