Qazi Masood Ahmed

The nexus between sectoral FDI and institutional quality: empirical evidence from Pakistan

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.

Does the Institutional Quality Matter to Attract the Foreign Direct Investment? An Empirical Investigation for Pakistan

This study investigates the role of the institutions as a determinant of foreign direct investment (FDI) in the case of Pakistan by applying the autoregressive distributed lag (ARDL) cointegration technique. The results demonstrate that the institutional quality exerts long-run impact in determining the FDI inflows. The findings suggest that institutional quality is an important determinant of the FDI in Pakistan. The joint impact of institutional quality and trade openness is also significant and positively contribute to attract FDI in the short run as well as in the long run. The findings strongly support the hypothesis that simultaneous implementation of policy mix, that is, reducing trade barriers and improvement in institutional quality, play significant role in attracting FDI in a developing country like Pakistan.

The Impact of Quality of Institutions on Sectoral FDI

This study addresses the issue whether institutional quality affects the sectoral FDI both in short run and long run in Pakistan. By employing ARDL co-integration technique, we analyse the impact of institutional quality on primary, manufacturing and services sectors FDI in Pakistan. The findings suggest that institutional quality matters in attracting FDI in manufacturing and services sectors in the long run while institutional quality does not have a significant impact on FDI in the primary sector. Moreover, results show that the impact of institutional quality on these sectors is not apparent in short run. The main findings from this research are that in long run institutional quality matters to attract substantial FDI in manufacturing and services sector of Pakistan. Hence, policies aimed at strengthening the institutional quality should be the priority for government. JEL: F21, O43, C22

Exchange Rate Volatility and Pakistan’s Exports to Major Markets: A Sectoral Analysis:

The present study investigated the impact of exchange rate volatility on Pakistan’s bilateral sectoral exports with its major trading partners, that is, USA, UK, Japan, Germany and Saudi Arabia. We have employed the multivariate co-integration test and found the presence of a long-run relationship amid the variables. The empirical evidence indicates that exchange rate volatility has consistent and favourable effect on sectoral exports of Pakistan in most of the cases. These sectoral exports’ results are considerably different from the results of aggregate and bilateral exports as the long-run elasticities for exchange rate volatility, regarding sectoral exports across countries, are all greater in magnitude as compared to aggregate and bilateral elasticities of exchange rate volatility, and some signs are also opposite (Alam & Ahmed, 2012). This concludes that the aggregate and bilateral aggregate exports data may weaken the effects of exchange rate volatility to statistically insignificant or less significant, and that the effect of exchange rate volatility may probably be more responsive to the nature of industry producing exportable goods.

The Effect of Exchange Rate Volatility on Pakistan’s Bilateral Exports to Major Recipients

The dynamic relationship between bilateral exports demand for Pakistan and exchange rate volatility as well as some selected explanatory variables with six major trading partners’ countries, namely, USA, UK, Japan, Saudi Arabia, Germany and UAE, has been examined during 1982Q1 to 2013Q2. The autoregressive distributed lag (ARDL) bound testing approach suggests a stable long-run relationship among selected explanatory variables over the sample period from Pakistan’s bilateral exports to each of its chosen trading partner except Japan. The result suggests that exchange rate volatility adversely affects the demand for Pakistani exports to USA but it positively affects demand for Pakistani exports to Germany in the long run. The short-run causality analysis of ARDL demonstrates that exchange rate volatility causes demand for Pakistani exports in USA and UK adversely, while in case of Germany it causes positively. For Saudi Arabia and UAE, real effective exchange rate volatility does not affect demand for Pakistani exports in the short run as well as in the long run. The study concludes that different export elasticities for different export recipient countries derived in the present study suggest that a single trade policy will not provide a solution to improve country’s external trade sector.

Governance and Happiness: Evidence From Citizens? Perception in Pakistan

This paper examines the impact of governance on happiness of residents in a developing society. Two major aspects of governance, i.e., democratic and technical governance are used for this analysis. Governance and happiness are measured on the basis of citizen?s perceptions through a survey from all over the country. We find a significant relationship between self perceived governance and happiness. Our estimates suggest that improvement in democratic and technical governance will increase happiness of its citizens. Results carry important implications for a developing country like Pakistan to improve the government institutions and their functioning in order to increase their effectiveness.