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Impact of Foreign Direct Investment on Growth in Pakistan: The ARDL Approach

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  • Nilofer, Nilofer
  • Qayyum, Abdul

Abstract

Investment is vital ingredients of growth in an economy. Saving contributes to investment which contributes to physical and human capital formation both of which promote growth of Gross Domestic Product (GDP) of a country. This study aims at determining the role of the three types of investment i.e., public, private and foreign direct investment (FDI) in the growth of Pakistan economy with a special focus on the contribution of FDI in GDP growth of the Pakistan. Cointegration analysis of time series data was used to analyze model. Autoregressive Distributed Lag (ARDL) approach has been used to analyze the long run relationship between GDP growth, investment and government expenditure for Pakistan using data (1970-2015). The results indicate that while public and private investment and lending rate have a positive impact on growth, public consumption and FDI decelerate GDP growth. Also the investor confidence should be bolstered by improving the law and order and security situation of the country and introducing investment friendly policies to further harness the positive impact of investment on growth.

Suggested Citation

  • Nilofer, Nilofer & Qayyum, Abdul, 2018. "Impact of Foreign Direct Investment on Growth in Pakistan: The ARDL Approach," MPRA Paper 86961, University Library of Munich, Germany, revised 2018.
    • Handle: RePEc:pra:mprapa:86961
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    File URL: https://mpra.ub.uni-muenchen.de/86961/1/MPRA_paper_86961.pdf
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    More about this item

    Keywords

    Investment; FDI; Growth; Cointegration; Autoregressive Distributed Lag Model; Bounds Testing; Pakistan;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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