Economic determinants of foreign direct investment (FDI) in commodity producing sector: A case study of Pakistan

This study examines the major economic determinants of FDI inflows in commodity-producing sector of Pakistan, by using time series data (quarterly) covering the period of 1996Q1-2008Q4. Augmented Dickey Fuller (ADF) test has been used to check the sationarity of the data. In this study, Co-integration and Error Correction Model (ECM) are used for estimation. Results reveal that Gross Domestic Product (GDP), Real growth Rate of GDP in Commodity-Producing Sector (GRP), Gross Fixed Capital Formation (GFCF), Foreign Exchange Reserves (FOREX), Degree of Trade Openness (RTO) and Per Capita income (PC) are key determinants of FDI inflows in commodity-producing sector of Pakistan. This study explores that all these variables are found statistically significant with positive signs. It seems that these variables have significant impact on FDI inflows into Pakistan in commodity-producing sector.