Inward foreign direct investment impact on stock market development in Pakistan

Abstract

The literature shows that the transformation effect of the inward foreign direct investment on stock market development is indirect. Because of this the FDI influence on stock market development can be neutral or expansionary. This study investigates the inward FDI impact on stock market development in Pakistan using data over the period 1993 to 2018. For results estimation, Johnson Cointegration, Fully Modified Least Squares (F.M.O.L.S) and Canonical Cointegrating Regression (C.C.R.) techniques are applied to the data. The findings reveal that FDI promote the stock market development in Pakistan in the long run. The findings suggest that attracting foreign direct investment in the country is dependent on effective policies, which can develop the stock market and ultimately boost the economic growth.