摘要：The paper studies the impact of trade liberalization on foreign direct investment (FDI) in Pakistan using quarterly data from 1972 to 2010. The findings suggest that there is a significant positive relation between trade liberalization and FDI. The results are robust under alternative trade liberalization measures and different model specifications. The results indicate that the factors that drive foreign investment have a differential impact on FDI flows to Pakistan. Specifically, human and physical capitals, capital return, infrastructure development, terms of trade and urbanization promote FDI in Pakistan. Foreign debt and inflation lead to deteriorating foreign investment in the country. Another important finding is that the effect of trade liberalization on FDI has been augmented after the inception of a flexible exchange rate system in Pakistan. However, this result is not robust to alternative equation specifications.
