Financial Risk and Foreign Direct Investment: Evidence from Pakistan Economy

The purpose of this paper is to inspect whether Financial risk influence FDI in Pakistan economy. In order to achieve the study objective and to answer the question, the Unit root test, Co integration test, OLS methodology and Granger causality test has been used. Time series data for the year 1982 to 2011 is used and this study measures the financial risk by considering foreign debt services, exchange rate, foreign debt and current account. The study results signify that efficient use of foreign debt can attract more foreign direct investment in the country. The paper shows that financial risk has significant impact on foreign direct investment.