TITLE

The Causal Relationship between Foreign Direct Investment and Current Account: An Empirical Investigation for Pakistan Economy

AUTHOR(S)
Siddiqui, Danish Ahmed; Ahmad, Mohsin Hasnain
PUB. DATE
January 2012
SOURCE
European Journal of Economics, Finance & Administrative Sciences;Jan2012, Issue 44, p107
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper investigates relationship between FDI and current account (CA) in Pakistan using the Johansen-Juselius cointegration technique and the Granger causality test. The study results indicate that FDI and CA are cointegrated and thus exhibit a reliable long run relationship. The Granger causality test findings indicate that the causality between FDI and CA is uni-directional. However, there is no short run causality from FDI to CA and vice versa. Therefore, as a policy implication that FDI inflows may cause to the deterioration of the balance of payments in the long run should be taken into account when policy makers decide to implement policies to attract foreign investors.
ACCESSION #
71911956

 

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