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Analyzing the Impact of Foreign Capital Inflows on Domestic Savings in Pakistan: A Comprehensive Time Series Investigation

Author

Listed:
  • Maria Batool

    (Bahauddin Zakariya University, Pakistan.)

  • Muhammad Ramzan Sheikh

    (Bahauddin Zakariya University, Pakistan.)

  • Asad Abbas

    (COMSATS University Islamabad, Vehari Campus, Pakistan.)

  • Sana Ashraf

    (GGPS, Muhammad Pur Khokha, Pakistan.)

Abstract

This research delves into the ramifications of foreign capital inflows on domestic savings within the context of Pakistan. Utilizing annual time series data spanning from 1972 to 2022, this study employs the Auto Regressive Distributed Lag (ARDL) methodology alongside causality analysis. The findings underscore that factors such as labor force participation rate, gross fixed capital formation, deposit interest rate, foreign direct investment, trade, GDP growth, and foreign remittances exert a favorable influence on gross domestic savings over the long term. Conversely, variables encompassing age dependency, external debt stock, and net official development assistance exhibit a detrimental impact on gross domestic savings. Furthermore, the outcomes derived from the Granger causality test reveal the absence of causal relationships between foreign direct investment, remittances, trade, external debt, and gross domestic savings. Notably, unilateral causality is identified solely between net official development assistance and gross domestic savings.

Suggested Citation

  • Maria Batool & Muhammad Ramzan Sheikh & Asad Abbas & Sana Ashraf, 2023. "Analyzing the Impact of Foreign Capital Inflows on Domestic Savings in Pakistan: A Comprehensive Time Series Investigation," Journal of Economic Sciences, Federal Urdu University Islamabad, Department of Economics, vol. 2(2), pages 93-112, December.
    • Handle: RePEc:azm:journl:v:2:y:2023:i:2:p:93-112
    DOI: 10.55603/jes.v2i2.a2
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    More about this item

    Keywords

    Foreign Aid; FDI; Foreign Debt; ForeignRemittances; Savings; ARDL; Causality Analysis;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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