Topic: Impact of Foreign Policy on Macroeconomic

situation and long term growth in Pakistan

Ali Asghar
2247226
3D
Macroeconomic Variables the Indicators for the Economic Growth
of Pakistan

(Muhammad irshad et al, 2022 ) Examined important conclusions are drawn from an analysis of
the influence of macroeconomic factors on Pakistan's economic growth. Numerous studies have
focused on Pakistan, emphasizing its unique economic challenges due to its geopolitical position
and socioeconomic structure. The primary macroeconomic variables investigated include
government expenditure, foreign direct investment, inflation rate, exchange rate, and savings
rate. Most studies employ time series econometrics, such as ARDL, VAR, and panel data models
to analyze the relationship between these variables and economic growth. The research
predominantly employs secondary data, drawing from sources like the World Bank, IMF, and
Pakistan's own statistical agencies. Econometric software like Views, STATA, and R are
commonly used for data analysis. The findings have direct policy implications, guiding
government decisions regarding fiscal and monetary policy, trade, and investment promotion.
Research generally suggests that variables like FDI and government expenditure positively
impact economic growth, while inflation can have both positive and negative effects depending
on the level. The exchange rate and savings rate exhibit mixed results. Common limitations
include data quality issues, endogeneity concerns, and the omission of important variables.
Moreover, studies often neglect the impact of political instability and social factors on economic
growth in Pakistan.
Impact of Inflation and FDI on Economic Growth: A Time Series: Analysis of
Pakistan
(mehak et al 2023) observed several important conclusions that can be drawn from research on
the effects of macroeconomic factors on Pakistan's economic growth. Numerous studies have
focused on Pakistan, emphasizing its unique economic challenges due to its geopolitical position
and socioeconomic structure. The primary macroeconomic variables investigated include
government expenditure, foreign direct investment, inflation rate, exchange rate, and savings
rate. Most studies employ time series econometrics, such as ARDL, VAR, and panel data models
to analyze the relationship between these variables and economic growth. The research
predominantly employs secondary data, drawing from sources like the World Bank, IMF, and
Pakistan's own statistical agencies. Econometric software like EViews, STATA, and R are
commonly used for data analysis. The findings have direct policy implications, guiding
government decisions regarding fiscal and monetary policy, trade, and investment promotion.
Research generally suggests that variables like FDI and government expenditure positively
impact economic growth, while inflation can have both positive and negative effects depending
on the level. The exchange rate and savings rate exhibit mixed results. Common limitations
include data quality issues, endogeneity concerns, and the omission of important variables.
Moreover, studies often neglect the impact of political instability and social factors on economic
growth in Pakistan.

DANISH SALMAN

The dynamic impact of foreign portfolio investment on stock prices in Pakistan

Malik shahzad et al, (2019)

The pivotal role of both foreign and domestic investments in economic development, especially
in underdeveloped economies, has been emphasized in various studies. Using Pakistan as a case
study, this research explores the causal relationship between domestic and foreign private
investments and their subsequent impact on economic growth. With time-series data spanning
1980 to 2017, the autoregressive distributed lags (ARDL) method was employed for analysis.
Primary variables investigated were domestic and foreign private investments and their effects
on economic growth. Long-term outcomes revealed a negative, albeit insignificant, contribution
of foreign private investment to economic growth, contrasting the positive impact of domestic
investment Conversely, short-term results exhibited a positive correlation between both
investment forms and growth rates. Additionally, the error correction term (ECT) rectifies data
disequilibrium at 42.7% annually. The F-test further affirmed the model's statistical significance.
Yet, a possible limitation could be an over-reliance on historical data, which might not resonate
with other developing nations' economic contexts.

Investigating the Impact of Economic Freedom on Foreign Direct

Investment in Pakistan
Rafique et al, (2023)

This research seeks to understand the interplay between foreign portfolio investments (FPI) and
Pakistan's stock prices, emphasizing both short-term and long-term dynamics. Unique to the
Pakistani context, the study explores the influence of FPI on the domestic stock market. The
increased prevalence of FPI in developing nations is attributed to several factors, including stock
market growth, economic liberalization, attractive investment returns, heightened trade openness,
and advancements in communication and global technology. The study employs annual time
series data covering the period from 1984 to 2016. For the analysis, the autoregressive
distributed lag (ARDL) method is used, illuminating both long-term and short-term relationships
between FPI and associated policy variables. Notably, all outcomes were statistically significant,
with the exception of the exchange rate. The model showcased robustness, as evidenced by the
diagnostic and stability tests. However, the limitation of the research rests in its exclusive focus
on Pakistan, potentially limiting its generalizability to other developing economies.

RAKESH DUHLARI

Impact of Globalization on Industrial Sector Growth in

Pakistan
Muhammad Azhar et al,(2021)
In their Research review, comprehensively examined the impact of globalization
on the industrial sector growth in Pakistan. Their study illuminated the
transformative effects of globalization on the country's industries. One of the
primary outcomes highlighted was the expanded market opportunities that
globalization provided. With reduced trade barriers, Pakistani industries
experienced increased exports, especially in sectors like textiles and garments,
which significantly bolstered industrial production and economic growth.
Additionally, emphasized the pivotal role of foreign direct investment (FDI) in
Pakistan’s industrial sectors. The infusion of FDI brought advanced technologies
and managerial expertise, fostering innovation and enhancing the overall efficiency
of industries. This technological integration not only elevated productivity but also
contributed to the diversification of industries, making them more competitive
globally. However, the literature review also acknowledged challenges. Domestic
small and medium enterprises faced difficulties in competing with large
multinational corporations, underscoring the inequality in globalization’s benefits.
Despite these challenges, the overall impact on Pakistan's industrial sector was
positive. Globalization facilitated knowledge exchange, innovation, and market
diversification, establishing the industrial sector as a significant driver of Pakistan's
economic growth in the global arena. Bhatti and Fazal’s review thus underscored
the importance of strategic
policies to ensure that the benefits of globalization are equitably distributed across
all sectors of the economy.

The dynamic impact of foreign portfolio investment on

stock prices in Pakistan

Shabbir et al,(2019) The research explored the dynamic impact of foreign

portfolio investment on stock prices in Pakistan. Their study delved into the
intricate relationship between foreign portfolio investment and the fluctuations in
the country’s stock market. The authors emphasized the critical role played by
foreign portfolio investment in shaping Pakistan’s stock prices. They highlighted
that the influx of foreign investment has a multifaceted impact on the stock market,
leading to both short-term volatility and long-term stability. Foreign portfolio
investment injects liquidity into the market, which often causes immediate
fluctuations in stock prices due to increased trading activities. These short-term
movements are influenced by global economic events and investor sentiments,
reflecting the market's immediate response to external stimuli. However, Shabbir
and Muhammad’s review also delved into the long-term effects. They observed
that sustained foreign portfolio investment could enhance market stability over
time. Stable and increasing foreign investments indicate confidence in Pakistan's
economic prospects, which tends to positively influence stock prices in the long
run. Moreover, these investments often lead to the development of the financial
sector, increased market efficiency, and improved corporate governance standards,
all of which contribute to the overall resilience of the stock market. The study
underscored the need for policymakers and market regulators to strike a balance
between encouraging foreign portfolio investment for market liquidity and
ensuring mechanisms are in place to mitigate excessive short-term volatility.
Shabbir and Muhammad’s review thus provided valuable insights into the nuanced
dynamics between foreign portfolio investment and stock prices in Pakistan,
offering a comprehensive understanding of the market’s behavior in response to
global investment trends.

Yousuf Hussain 2047186

(Dynamic association of stock market volatility, foreign portfolio
investment and macroeconomic indicators by taking the impact of
structural breaks) :
(Johnson et al, 2019) Research on stock market volatility and foreign portfolio
investment (FPI) reveals a multifaceted relationship with significant implications
for investment decisions like this. While FPI is often influenced by various factors
such as economic growth and interest rates, it can also be significantly impacted by
stock market volatility, leading to investors closely monitoring these trends to
make informed decisions. (Brown & Davis, 2020) Furthermore, research shows
that market volatility can both attract and deter foreign portfolio investment,
depending on the risk appetite of investors A study by suggests that when stock
market volatility is low, it tends to attract FPI due to the perceived stability and
potential for high returns. However, during periods of high volatility, risk-averse
investors may seek safer havens, reducing foreign portfolio investment. Therefore,
it's essential for investors to have a comprehensive understanding of stock market
volatility's nuanced relationship with FPI to make well-informed investment
decisions.
2.LITERATURE REVIEW (Impact of Industrial Production and FDI
on CO2 Emissions in Pakistan)
Mehmood et al, (2022) Research contributed on the relationship between
industrial production, Foreign Direct Investment (FDI), and CO2 emissions in
Pakistan, shedding light on the complex interplay of economic growth,
environmental sustainability, and policy considerations. Boyd, Hanson, and Sterner
(1988) also noted that industrialization tends to increase emissions due to higher
energy consumption but that the impact varies depending on the level of
technological advancement and energy efficiency within industries. Moreover,
Kichcarslan and Dumrul and Kizilkaya argue that FDI can bring advanced
technologies and management practices, enhancing energy efficiency and
potentially leading to lower CO2 emissions. The extent to which FDI mitigates
emissions depends on various factors, including the sector in which it is invested
and the quality of institutions and regulatory frameworks. Nasir and Rehman and
Shahbaz, Lean, and Shabbir (2012) have explored the validity of the
Environmental Kuznets Curve (EKC) hypothesis in Pakistan, which suggests that
economic

References
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