Open AccessRole of Stock Market Performance and Exchange Rate Volatility in the Inflow of Foreign Direct Investment: An Evidence from Pakistan
Author(s) -
Rukhsana Rasheed,
Mazhar Nadeem Ishaq,
Muhammad Fahad Malik
Publication year - 2022
Publication title -
irasd journal of management
Language(s) - English
Resource type - Journals
eISSN - 2709-8451
pISSN - 2709-8443
DOI - 10.52131/jom.2022.0401.0063
Subject(s) - foreign direct investment , openness to experience , exchange rate , monetary economics , stock market , economics , unit root , international economics , volatility (finance) , stock (firearms) , macroeconomics , financial economics , econometrics , mechanical engineering , psychology , social psychology , paleontology , horse , biology , engineering
The purpose of this study was to evaluate the role of macroeconomic variables i.e., stock market performance and exchange rate fluctuations on Foreign Direct Investment (FDI) for Pakistan. The required data was collected for the period of 1996 to 2020 from the World Bank and State Bank of Pakistan. In data analysis, the unit-root tests were performed to decide whether a time-series is stationary or not. An ARDL is constructed to achieve the results of this study. The results of this study provided the evidences that stock market performance and trade openness have positively and significantly linked with FDI. Whereas real GDP growth rate and exchange rates have negative effects on FDI. It is recommended that the trade policies should be devised in such a manner that these policies should promote exports. Furthermore, policies that ensure stable stock market performance could be an important factor for bringing FDI to Pakistan. However, FDI seems to be ineffective from the changes in the rate of inflation.