A Comprehensive Assessment of Pakistan’s Sectoral Export Via Inward Foreign Direct Investment: An Operational Implications

Abstract

This study comprises a panel of nine sectors and has been analyzed for monthly data for 108 months for the period from 2006 to 2022 by using the statistical packages of STATA. In monthly analysis panel unit root tests of Fisher Dicky Fuller, Pesaran and Shin and Breitung are conducted which infer that exports, foreign direct investment, domestic investment, exchange rate, terrorism, production, scale economy and labor productivity are stationary at level ‘I(0)’ while exchange rate is stationary at order one ‘I(1)’. This reveals that the problem of non-stationarity is not very serious. So pooled regression, Least Square Dummy Variable, fixed effect and random effect models have been used. Results show that in analysis across sectors, lag exports, domestic investment, exchange rate, terrorism and labor productivity have an influential effect on exports in the many sectors. However, foreign direct investment has no significant effect on exports in the sectors of food, chemicals, textile and machinery and equipment. While in overall sector analysis, lag exports, foreign direct investment, domestic investment and exchange rate have significant positive effect on export. This shows that food, chemical, textiles and machinery sectors are favorable sectors for foreign direct investment.