Syeda Amina Hasan, Mirza Aqeel Baig,Irfan Lal
This paper investigates the impact of Infrastructure Development Index (IDI) on FDI using GFCF, INFL, TOPEN, EXR and INFL as the independent variables. The main contribution of this paper is to generate a comprehensive Infrastructure Development Index in Pakistan using 11 variables by applying the Principal Component Analysis. The main components used to generate the IDI include Transport, Telecommunication, Energy and Water and Sanitation. The time series technique of Johansen Cointegration in VAR and ECM is used for the analysis of the data and to derive empirical results for the year 1980 to 2018. After the analysis of our data the results of the Johansen Cointegration and ECM concludes that there exists a long and short run relationship between IDI and FDI in the case of Pakistan.