Time Series Analysis of Role of Infrastructure in Growth of FDI: The Case of Pakistan.

Author(s)

M.M Shah Khan , Anum Akmal , Hadiya Khan ,

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Volume 4 - October 2015 (10)

Abstract

Foreign Direct Investment (FDI) has its major contribution in economic development of a country. It has been clear from Literature that Foreign Direct Investment (FDI) not only facilitates in capital formation but also a source of new technology development in a country. This study has been conducted to ensure the impact of Infrastructure on FDI with the help of time series analysis by taking Pakistan as a case. The data of 30 years collected from two major sources; World Bank and Ministry of Finance for the time period 1980 to 2013. The variables used for this research are FDI (dependant variable) and Infrastructure (independent variable) also includes proxy variables with independent variable i-e; ((Real Government Expenditure per real GDP), Market size (Real GDP per capital), Openness (Real trade share (Import – export) per capital), Human Capital (total real education expenditure). Time series analysis conducted to find out the relationship between FDI and Infrastructure. First step to start the time series analysis is to check, whether the data is stationary or not. The randomness of time series data is like a basic building block to go for further analysis. In this study, by applying ADF (unit root test) on Eviews it came to know that some of the variables are stationary at I(1) and some of them are stationary at I(2). After getting stationary data at 1st difference and 2nd difference, the ordinary least square (OLS) with White Heteroskedasticity employed to estimate the model. Findings showed the positive impact of Infrastructure on FDI, heteroskedasticity does not exist and also the regression is not spurious. The results can definitely be useful for policy makers to take decisions regarding economic growth and development of infrastructure. 

Keywords

Time Series, Role of Infrastructure, Analysis, Growth of FDI

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