The nexus between sectoral FDI and institutional quality: empirical evidence from Pakistan |
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Authors: | Syed Hasanat Shah Mohsin Hasnain Ahmad Qazi Masood Ahmed |
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Affiliation: | 1. School of Economics, Jilin University, Changchun, China;2. Applied Economic Research Center, Karachi University, Karachi, Pakistan;3. Institute of Business Administration Karachi, Karachi, Pakistan |
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Abstract: | This study investigates short- and long-run bidirectional causality between institutional quality and sectoral-level FDI in Pakistan by using the ARDL technique. The results confirm that long-run bidirectional causality exists between institutional quality and aggregate FDI. The in-depth sectoral-level FDI analysis substantiates the presence of long-run bidirectional causality between institutional quality and FDI in services and manufacturing sectors, while no long-run causality is observed between institutional quality and FDI inflows in primary sector. Furthermore, the results in the study reveal short-run bidirectional causality only between institutional quality and manufacturing FDI and report insignificant short-run causal link between institutional quality and FDI in primary and services sectors. The overall findings of the study suggest that in the long-run institutional quality attract FDI and FDI inflows, particularly to manufacturing and services sectors, significantly enhance the quality of institutions in Pakistan. |
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Keywords: | FDI Sectoral FDI institutions ARDL technique Pakistan |
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