Abstract

In our study we have proven that FDI has crucial role in the growth of economy and the major source of the investment between developing and under developing countries, which is act as the bridge between saving-investment gaps. FDI is also way to increase the employment opportunities, economic growth and transfer of technology. In this study we have determined the different benefits of FDI for Pakistan .For this purpose we have taken the data from 1981 to 2011.we had collected the secondary data .the basic purpose of this study is to check the influence of cost of war against the terrorism. We had applied two basic techniques ARMA model and OLS regression. Our result is showing that there is negative relationship between FDI and cost of war against the terrorism. However, control variables namely, trade openness; incentives, market size and exchange rate stability have positive impact on the inflows of FDI. On the other side, inflation rate has negative impact on the inflows of all developing and under developing country.

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