Yasir Khan, Mingyi Wang and Taimoor Hassan
The aim of this study to determine the relationship of foreign direct investment (FDI) with import and export in Pakistan with the help of annual time series data for the period of 1978-2016. Foreign direct investment is considered an important component and received significant attention not only developed but also developing countries during the last couple of decades. To understand the objectives of this study, first of all, we conduct statistical analysis to find out the relationship between foreign direct investment (FDI) and its impact on selected macroeconomic factors such as export and import. For data analysis, we use Vector Auto Regression Model (VAR) and (ARDL) for the short-run and long-run relationship. The results show that there is a long-term relationship between FDI and Export while short-term relationship indicated between FDI and import. To support the outcomes of VAR mode we did a few other post diagnostic tests where we concluded that the regressions have a normal distribution and show a strong correlation between the three variables.
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