Title: Exploring the effects of financial liberalisation on foreign direct investment: moderating role of corruption and political instability

Authors: Ferdos Jamal; Yan Zhijun

Addresses: School of Economics and Management, Nanjing University of Science and Technology, Nanjing, Jiangsu Province, 210094, China ' School of Economics and Management, Nanjing University of Science and Technology, Nanjing, Jiangsu Province, 210094, China

Abstract: This study investigates the relationship between financial liberalisation (FL) and foreign direct investment (FDI) in Pakistan between 1996 and 2022, focusing on the moderating effects of political instability and corruption. To address the complicated factors that play a role in FDI decisions, this study considers FL impact while also considering the potential impact of corruption and political instability. This empirical study is based on a comprehensive dataset that contains information on the FL index, FDI inflow, corruption, and political instability. The findings indicate a substantial association between FL and FDI, with higher levels of FL having a tendency to attract more FDI than lower ones. In addition, significant interaction effects between corruption and political instability were found in the relationship between FL and FDI. The results help in understanding increasing FDI inflows by integrating efforts to combat corruption and ensuring political stability with projects involving FDI.

Keywords: financial liberalisation; FDI; foreign direct investment; corruption; political instability; Pakistan.

DOI: 10.1504/AJFA.2024.141552

American Journal of Finance and Accounting, 2024 Vol.8 No.2, pp.164 - 181

Received: 29 Oct 2023
Accepted: 16 Apr 2024
Published online: 23 Sep 2024 *

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