Abstract
The empirical literature on the determinants of FDI, Energy
Consumption and Economic Growth in Pakistan is abundant. However,
the relationship between FDI and energy prices in Pakistan is not
deeply investigated and hence this study investigated the relationship
between energy prices and FDI in Pakistan in the long run and short
run. The current study has analyzed that how electricity prices are
affecting the foreign direct investment in Pakistan. ARDL Bound test
was conducted and it discovered that Cointegration exists among the
variables. Optimal Lags were selected using the Akaike info criterion.
In the short run, domestic prices and commercial prices has a short run
relationship with the FDI in Pakistan while in the long run domestic
prices and commercial prices has a relationship with FDI. The
Granger causality test was applied to find out the direction of the
variables. It suggested that domestic prices and industrial prices have
a unidirectional relationship with FDI in Pakistan. The stability of the
parameters was checked using the Cumulative Sum and Cumulative
Sum of Square test. The test shows that both the Plots remain within
critical bound at 5% level of significance
Muhammad Aleem. (2019) Increase in Electricity Prices and Foreign Direct Investment in Pakistan: New Evidences from ARDL Bound Test Approach , Journal of Managerial Sciences, Volume 13, Issue 1.
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