COVID-19 and FDI nexus in Pakistan: fresh evidence from QARDL and time-varying casualty techniques

Abstract

AbstractWhile the COVID-19 pandemic’s detrimental repercussions on global economic growth are not exactly measured, there is widespread agreement among the policy-makers that it can deteriorate the global economy drastically. To this end, several studies have endeavored to analyze the harmful effects of COVID-19 on economic activities; however, the scholars mainly focus on the developed nations and less attention is paid to the developing economies. Hence, the considerable effects of COVID-19 necessitate to more research in this area specifically for developing economies. To fill this literature gap, the recent article tends to divulge the impacts of COVID-19 on one of the vital macroeconomic variables, i.e., foreign direct investment inflows (FDI) with the consort of energy prices (EPI) and real exchange rates (EXR) for Pakistan. To this end, we deploy the two proxies (viz., new deaths and new cases) for COVID-19 to find the reliable and more directional results. For analysis purpose, we use the several advanced econometric techniques. The results of QARDL suggest that COVID-19 significantly reduces the FDI inflows in Pakistan due to rise in COVID-19, while employing the both proxies. However, based on the results, we suggest that the variable of new deaths is more reliable proxy to capture the effects of COVID-19. Similarly, we infer that EPI and EXR also lead to decrease the FDI inflows. Besides, the quantile Granger causality and TVGC tests also support our results by confirming the casual nexus from COVID-19 and EPI to FDI.