Foreign Direct Investment

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Recommended: The importance of foreign direct investment

Introduction:
Foreign Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor” (economy watch). The determinants of foreign direct investment may be the socio-economic, financial and the cultural factors which usually have positive and negative effect on the foreign direct investment. The risk is attached to the determinants of foreign direct investment. This paper examines the major determinants of foreign direct investment exchange rate, market size, political instability, infrastructure, openness to market and military rule. Data constraints in Pakistan some determinants consider to be the inefficient.
Regardless many determinants like infrastructure have the positive impact on the FDI. Rehman et al(2010).GDP has positively related with FDI. Khan and Nawaz (2010).Whereas Anjum and Nishat find the positive relation of exchange rate with foreign direct investment..
Akthar found the negative impact of the political instability and military rule. Due to the data constraint the political instability consider to be inefficient. He also found that the openness to market is positively related to FDI.
The main objective of the paper is to examine the relationship of determinants of foreign direct investment and to analyze the determinants of foreign direct investment and its significance.

Literature Review:
One of studies to explore the locational determinants with reference to Pakistan is done by Akthar (2000). He uses the technique of the multivariate regression to determine the determinants. He uses the market size (openness to trade), relative interest rate and exchange rate, political instabil...

... middle of paper ...

... Nawaz Atif Muhammad (2010)“Economic Determinants of Foreign Direct Investment in Pakistan” Journal of Economics : 99-104 (2010)
 Saeed Nazir (2001) “An Economic Analysis of Foreign Direct Investment and its impact on trade and Growth in Pakistan” Thesis submitted to The Islamia University Bahawalpur.
 Aqeel Anjum and Nishat Mohmmad “The Determinants of Foreign Direct
Investment in Pakistan” The Pakistan Development Review 43: 4 Part II (Winter 2004) pp. 651–664

 Dar, A. Humayun. , Presley.R.John Malik.H.Shahid(2003) Determinants of FDI inflows to Pakistan (1970-2002) unpublished, Loughborough University, UK
 www.economywatch.com/foreign-direct-investment/definition.html

 Holland Dawn and Pain Nigel “The Determinants And Impact Of Foreign Direct Investment In The Transition Economies: A Panel Data Analysis” National Institute of Economic and Social Research

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