Role of Foreign Capital Inflows in Economic Development of Pakistan

• Název v anglickém jazyce: Role of Foreign Capital Inflows in Economic Development of Pakistan
• Klíčová slova: economic development, foreign inflows, growth accounting
• Klíčová slova anglicky: economic development, foreign inflows, growth accounting
• Akademický rok vypsání: 2010/2011
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: PhDr. Jaromír Baxa, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 10.06.2011
• Datum zadání: 10.06.2011
• Datum a čas obhajoby: 28.06.2012 00:00
• Místo konání obhajoby: IES
• Datum odevzdání elektronické podoby: 18.05.2012
• Datum proběhlé obhajoby: 28.06.2012
• Oponenti: doc. Ing. Vladimír Benáček, CSc.

Zásady pro vypracování

This study would determine the impact of foreign inflows on economic growth in Pakistan with focus on international trade. It will also attempt to examine the relationship of foreign inflows with socio-economic variables like education, health, poverty, unemployment etc. In addition to the analysis on aggregate level of inflows, the impact of disaggregated components of foreign inflows on the variables listed above would also be analyzed.
1. Hypothesis #1:Foreign Inflows support economic growth in Pakistan
2. Hypothesis #2:Foreign Inflows have positive influence on international trade in Pakistan
3. Hypothesis #3: Foreign Inflows have favorable impact on socio-economic indicators of Pakistan

Seznam odborné literatury

Bigsten Arne (1998) “Can Aid Generate Growth in Africa?” [Report]. - Boston : Kluwer Academic Publishers.
Mohey-ud-din Ghulam (2006) “Impact of Foreign Capital Inflows on Economic Growth in Pakistan” [Online] // MPRA Archive. - http://mpra.ub.uni-muenchen.de/1233/.
Wanhui Fan (2005) “The Relationship between Foreign Direct Investment and Trade: China as an example”. [Online] - http://grad.econ.ubc.ca/cbidner/SPW2005/wenhui.pdf
Rajan, R. G., & Subramanian, A. (2005). Aid and Growth: What Does the Cross-Country Evidence Really Show. Working Paper WP/05/127, IMF.
Prasad, E. S., Rajan, R. G. and Subramanian, (2007) A, Foreign Capital and Economic Growth. NBER Working Paper Series, Vol. w13619, pp. -, 2007. Available at SSRN: http://ssrn.com/abstract=1033745
Pattillo, C., Poirson, H., & Ricci, L. (2004). What Are the Channels Through Which External Debt Affects Growth? Retrieved 2009, from International Monetary Fund, African and Asia and Pacific Departments: http://www.imf.org/external/pubs/ft/wp/2004/wp0415.pdf
Yasmin, B. (2005) “Foreign Capital Inflows and Growth in Pakistan: A Simultaneous Equation Model” South Asia Economic Journal Vol. 6 (2) pp. 207-219
Zaman, K and Ikram, W (2008) The Study of Foreign Direct Investment - Poverty Nexus in Pakistan: Under Investigation of Pro-Poor Investment Index (PPII) Online at http://mpra.ub.uni-muenchen.de/9332/

Předběžná náplň práce

Foreign Inflows (FI) plays an important role in development of a country. Although significance of such inflows is much larger in developing countries but it is not limited to them. Emerging economies, even developed countries, also need foreign inflows to manage their economy. However, size and the composition of such inflows are determined on the basis of country specific requirements. The need of foreign capital generally arises with the lack of capital in host country and low saving and investment ratios. Low household income reduces the government’s earning from taxes and hence it reduces government expenditures and consequently growth of the country slows down. With the passage of time, less developed countries have become more and more dependent on foreign inflows due to which their growth is completely reliant on funds from other countries. The result of this dependence is usually a shock on host country when these inflows are completely or partially dried-up. Moreover, misallocation of funds is also a very critical issue. If inflows are not well directed and not supported with sufficient research on host country, they may adversely affect growth of a country because of increasing poverty and unemployment rate with low investment on human capital.
The relationship between FI and trade is expected to be positive because of the spillover effects but the direction of trade is necessary to be analyzed to avoid the chance of misinterpretation. If FI brings positive change in the trade of host country, it can be through increase in imports or exports. If imports are the cause of its increase instead of exports, it hampers the trade balance of host country and increases the balance of payment deficit. On the other hand, if increase in trade is due to the increase in exports it will not only decrease the balance of payment deficit but would also increase economic activity in country. However, the increase in exports may not always bring good to the economy. If that increase is due to the export of commodities produced by foreign firms then most of the revenue is likely to be shifted to the home countries of the manufacturers. This will show exports in the book of host country but the realization of such revenues would only by partial. Similarly, if exports column of balance of payment account is increased by exporting necessities then it will increase inflation in the country, create unrest, hamper purchasing power of the individuals and hence create negative welfare impacts.
In case of Pakistan, very little work has been done on the issue. In fact there is no such study in Pakistan which has included aggregated foreign inflow variable in the analysis and then disaggregated it to capture the individual impacts. Moreover, there is no such study in Pakistan which has analyzed the impact of foreign inflows on economic growth with special reference to international trade. The study therefore would make a significant contribution to the literature by filling this gap.Despite the fact that above mentioned relationship is very important and not studied before for Pakistan, this study is not limited to it. It would also analyze the impact of foreign inflows on variables which indirectly affect the economic growth such as; poverty, unemployment, literacy, health, inequality, government expenditure etc.

Předběžná náplň práce v anglickém jazyce

Foreign Inflows (FI) plays an important role in development of a country. Although significance of such inflows is much larger in developing countries but it is not limited to them. Emerging economies, even developed countries, also need foreign inflows to manage their economy. However, size and the composition of such inflows are determined on the basis of country specific requirements. The need of foreign capital generally arises with the lack of capital in host country and low saving and investment ratios. Low household income reduces the government’s earning from taxes and hence it reduces government expenditures and consequently growth of the country slows down. With the passage of time, less developed countries have become more and more dependent on foreign inflows due to which their growth is completely reliant on funds from other countries. The result of this dependence is usually a shock on host country when these inflows are completely or partially dried-up. Moreover, misallocation of funds is also a very critical issue. If inflows are not well directed and not supported with sufficient research on host country, they may adversely affect growth of a country because of increasing poverty and unemployment rate with low investment on human capital.
The relationship between FI and trade is expected to be positive because of the spillover effects but the direction of trade is necessary to be analyzed to avoid the chance of misinterpretation. If FI brings positive change in the trade of host country, it can be through increase in imports or exports. If imports are the cause of its increase instead of exports, it hampers the trade balance of host country and increases the balance of payment deficit. On the other hand, if increase in trade is due to the increase in exports it will not only decrease the balance of payment deficit but would also increase economic activity in country. However, the increase in exports may not always bring good to the economy. If that increase is due to the export of commodities produced by foreign firms then most of the revenue is likely to be shifted to the home countries of the manufacturers. This will show exports in the book of host country but the realization of such revenues would only by partial. Similarly, if exports column of balance of payment account is increased by exporting necessities then it will increase inflation in the country, create unrest, hamper purchasing power of the individuals and hence create negative welfare impacts.
In case of Pakistan, very little work has been done on the issue. In fact there is no such study in Pakistan which has included aggregated foreign inflow variable in the analysis and then disaggregated it to capture the individual impacts. Moreover, there is no such study in Pakistan which has analyzed the impact of foreign inflows on economic growth with special reference to international trade. The study therefore would make a significant contribution to the literature by filling this gap.Despite the fact that above mentioned relationship is very important and not studied before for Pakistan, this study is not limited to it. It would also analyze the impact of foreign inflows on variables which indirectly affect the economic growth such as; poverty, unemployment, literacy, health, inequality, government expenditure etc.