Impact of Democracy, Political Instability and Policy Uncertainty on Private Investment

Asad Mahmood Bhatti, Amanat Ali, Muhammad Nasir and Waheed Iqbal1

Abstract

This paper examines the impact of political institutions on growth through the investment in private sector of Pakistan. Three main determinants of private investment in the politico-economy are democracy, political instability and policy uncertainty. The empirical results show that political instability and policy uncertainty are negatively related with gross fixed capital formation whereas democracy is not significantly affecting the level of private investment in case of Pakistan.