Foreign direct investment-domestic investment nexus in Pakistan

FDI may have positive or negative impact on domestic investment. The present study tries to find out the relationship FDI and domestic investment. FDI, financial market development and GDP growth rate are taken as independent variables and domestic investment as independent variable in the model. ADF, PP, Ng-Perron and Zivot-Andrews unit root tests are applied to find the level of integration. ARDL cointegration technique and its error correction model are applied to check the long run and short run relationships. The study finds that long run and short run relationships 7exist in the model. FDI, financial market development and economic growth have the positive and significant impact on the domestic investment.