Analysis of socioeconomic factors that dampen the flow of foreign direct investment

Abstract

It is difficult to neglect the prominence of socio-economic factors that dampen the flow of Foreign Direct Investment (FDI) to a country, inspite of either being developed or developing. This study, however, looked into such factors that affect FDI inflows towards Pakistan. This study gains appreciable position due to an attempt of looking into the theoretical perception, some of whom are tested while others are not, that explain such determinants of FDI. Exercising Auto Regressive Distributed Lag (ARDL) technique of investigation on data ranging from 1974 to 2014 along with Error Correction Model (ECM) and bound test, some interesting facts, apart from conventional, though not in Pakistan or either quite rare, are found on the socioeconomic variables mix chosen in this research. It is suggested that the government is to look for specific policies to cater the problem of corruption that is found as a major hinge in the way of FDI inflows.