Political Instability and Inward Foreign Direct Investment: The Perspective of Government Corruption from an Emerging Economy

초록

Pakistan is a South Asian auspicious developing country. Based on the corruption perception index report 2020 by transparency international, Pakistan has ranked 124 with total scores of 31 globally and 188 ranks with a score of -2.25 in terms of political stability ranging from 0 (lowest) to 100 (highest). More crucially, the inflow of foreign direct investment toward Pakistan has declined between 2008 and 2019. Though political instability and government corruption have both positive and negative linear relationships with foreign direct investment, we tested the moderating impact of government corruption between political instability and inward foreign direct investment over time. We also tested the relationship between political instability and inward foreign direct investment in different phases of political regimes in the same country. Our results suggested that authoritarian regimes attracted more inward foreign direct investment than that during democratic periods of government. Furthermore, we found that there was low inward foreign direct investment when government corruption was high in the country. However, government corruption weakened the positive relationship between political instability and inward foreign direct investment (FDI).

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