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Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan

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  • Mohammad Mafizur Rahman
  • Muhammad Shahbaz

Abstract

The article investigates the impacts of imports and foreign capital inflows on economic growth of Pakistan over the period 1990 to 2010. We have applied the structural break autoregressive distributed lag (ARDL) bounds testing approach to cointegration to examine the long-run relationship between the variables. The vector error correction model (VECM) Granger causality multivariate framework is used to investigate the causal relationship between the series. Empirical analysis in this article confirms the long-run relationship between foreign capital inflows, imports and economic growth. The results indicate that foreign capital inflows and imports have positive and significant effect on economic growth in case of Pakistan. Causality analysis reveals the bidirectional causality between the variables, but strong causal relation is running from foreign capital inflows and imports to economic growth.

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Bibliographic Info

Article provided by Institute of Policy Studies of Sri Lanka in its journal South Asia Economic Journal.

Volume (Year): 14 (2013)
Issue (Month): 1 (March)
Pages: 59-81

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Handle: RePEc:sae:soueco:v:14:y:2013:i:1:p:59-81

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Web page: http://www.ips.lk/

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Keywords: Imports; FDI; growth; Pakistan;

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References

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Citations

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Cited by:
  1. Tsangyao Chang & Beatrice D. Simo-Kengne & Rangan Gupta, 2013. "The Causal Relationship between Exports and Economic Growth in the Nine Provinces of South Africa: Evidence from Panel-Granger Causality Tests," Working Papers 201319, University of Pretoria, Department of Economics.
  2. Mohamed Arouri & Gazi Salah Uddin & Kishwar Nawaz & Muhammad Shahbaz & Frédéric Teulon, 2013. "Causal Linkages between Financial Development, Trade Openness and Economic Growth: Fresh Evidence from Innovative Accounting Approach in Case of Bangladesh," Working Papers 2013-037, Department of Research, Ipag Business School.
  3. repec:ipg:wpaper:37 is not listed on IDEAS
  4. Kandil, Magda & Shahbaz, Muhammad & Nasreen, Samia, 2013. "The Interaction between Globalization and Financial Development: New Evidence from Panel Co-integration and Causality Analysis," MPRA Paper 52148, University Library of Munich, Germany, revised 10 Dec 2013.

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