Political Determinants Influencing Foreign Direct Investment Inflow in Pakistan

Abstract

Numerous research, economic theories, and real-life examples suggest that political variables significantly impact foreign direct investment (FDI) inflow. This research proposes to assess the impact of political factors of FDI inflow in Pakistan by applying the autoregressive distributed lag model simultaneous integration (ARDL) technique from 1990 to 2017. The dependent indicator is FDI, while the regressors are government effectiveness, regulatory quality, and political stability. The empirical evidence recommends that all political variables are significant in the short run and long run as they have an immense effect on FDI inflow in Pakistan. These outcomes will help policymakers devise a strategy to ensure that economic growth and policies for such political factors help boost FDI inflows to the host economy.