Determinants of Private Investment in Pakistan: Empirical Investigation

Abstract

The study investigates the relationship between private investments in Pakistan and the three key determinants of interest rate, exchange rate, and political instability. Using secondary data from January 2011 to 2015, the quantitative method is used, and the regression analysis is used to assess the impact of these variables on private sector investment. The finding reveals that high interest rates negatively affect private investments by increasing borrowing costs, while favourable exchange rates boost investments by promoting exports. However, exchange rate volatility creates uncertainty, deterring long-term investment decisions. Political instability is identified as a significant deterrent. As it fosters economic uncertainty, discouraging both domestic and foreign investors. The study offers valuable insights for policymakers on promoting a more macroeconomic environment to enhance private investments, which is crucial for Pakistan's economy.