International journal of Engineering, Business and Management (IJEBM) [Vol-3, Issue-3, May-Jun, 2019] https://dx.doi.org/10.22161/ijebm.3.3.1 ISSN: 2456-7817 www.aipublications.com Page | 55 Does Macroeconomic factors Impact on Foreign Direct Investment in emerging economies?(Pakistan) Mr. Rizwan Ullah Khan 1 , Ms. Sobia 2 1 Ph. D Scholar, Graduate School of Business, University Sains, Penang Island, 11800, Malaysia rizwanhayat1989@gmail.com 2 M. Phil Scholar, Department of Zoology, Gomal University, Dera Ismail Khan, Pakistan sobia.dcma.lakki97@g mail.co m Abstract — Foreign direct investment is essential for economic growth of a country. It acts as a promoter for the economic development of a country. Keeping this in mind, the objective of this study is to determine the effect of macroeconomic variables such as interest rate, real exchange rate,inflation rate and stock market on foreign direct investment in Pakistan. For this purpose,study used the authentic annual data for the period of 27 years i.e. from 1990-2016. We are use for analysis E-View software, The empirical analysis involved using the ADF test to check the stationary of the data.Results revealed that interest rate and exchange rate have significant negative effect on FDI and stock market index has negative and unsignificant effect on FDI while inflation rate has positive and significant effect on FDI. Keywords— real interest rate, real exchange rate, inflation rate, stock market index, Foreign direct investment. I. INTRODUCTION Since past two decades foreign direct investment acting as a catalyst for the economic growth around the world. It is an most important part of international economic system and major key to development. FDI is being sought by most, if not all, developing countries as a means of complementing the level of domestic investment, as well as to access foreign markets to increase employment opportunities and improve living standards of people. According to Investment report (UN 1999) as “investment deal or involving long term relationship reflecting interest and control in one economy”. The main important feature of FDI definition is control and controlling interest, the control is to the power of making decision while controlling interest is to the benefits of an investor can get from investment. When the economic condition of a country changes, these changes also effect the FDI, and the inflow of foreign direct investment changes with it. In recent decades, FDI by MNC’s has increased and developing countries have been able to attract an increase inflow of FDI (Paramati, Mo, and Gupta, 2017). In the modern era of 21st century, it has been emphasized that Foreign Direct Investments (FDIs) discuss several economic such as, capital inflows adding to the reserves, thus, improving the balance of payments, increasing the exports and causing exports-led growth, encouragement innovation and modern technologies, new style of management skills, increasing the jobs and employment opportunities in the host country (Paramati, Ummalla, and Apergis, 2016). Studies by researchers have also cited that the importance of foreign direct investment in the sense that it can stimulate the domestic investors to invest further in the country. Time and again, developed as well as developing countries have been offering a lot of attractive packages to attract foreign investment inflows. The countries such as, China, India, Russia and Brazil are offering worthwhile packages of incentives to foreign companies, like low tax rate, cheap labor, export zone facilities, liberalized trade policy, market orientation of the economy, good infrastructure, good law and order security system. In the new economic order of the globalization period, the foreign direct investment is measured to be a major contributor to the economic growth of any developed and developing economy. In 1990s, foreign direct investment emerged, to developing countries in promoting industrialization, growth and development. It is interesting enough to compare the growth trends of trade and investment in observing the dynamics of international business in the world economy in the years consistent to a new era.