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Impact of FDI on Economic Growth: Evidence from Pakistan


  • Hafiz Muhammad Abubakar Siddique

    (Federal Urdu University, Islamabad, Pakistan)

  • Romana Ansar

    (Punjab Group of Colleges, Bhara Kahu Campus, Islamabad, Pakistan)

  • Muhammad Mustasim Naeem

    (National College of Business Administration and Economics, Lahore, Pakistan)

  • Sajid Yaqoob

    (University of Lahore, Islamabad, Pakistan)


This study investigates the nexus between foreign direct investment and economic growth for Pakistan for 1980-2016. Using autoregressive distributed lag bounds co-integration and granger causality test. The results of ARDL bounds test shows the existence of co-integration between economic growth, FDI, trade, physical capital and human capital. The results indicate the unidirectional causality from economic growth to FDI, to physical capital and to trade. The findings also express the one-way causality from human capital to labour force and physical capital. The bidirectional causality is found between physical capital and FDI, and between physical capital and human capital. The study suggests to adopt such policies that enhance human skills to attract more FDI for economic growth.

Suggested Citation

  • Hafiz Muhammad Abubakar Siddique & Romana Ansar & Muhammad Mustasim Naeem & Sajid Yaqoob, 2017. "Impact of FDI on Economic Growth: Evidence from Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(3), pages 111-116, September.
  • Handle: RePEc:rfh:bbejor:v:6:y:2017:i:3:p:111-116

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    References listed on IDEAS

    1. Zeshan Atique & Mohsin Hasnain Ahmad & Usman Azhar, 2004. "The Impact of FDI on Economic Growth under Foreign Trade Regimes: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 707-718.
    2. Abdul Khaliq & Ilan Noy, 2007. "Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia," Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
    3. Johnson, Andreas, 2006. "The Effects of FDI Inflows on Host Country Economic Growth," Working Paper Series in Economics and Institutions of Innovation 58, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    4. Seiko Minota Zekarias, 2016. "The Impact of Foreign Direct Investment (FDI) on Economic Growth in Eastern Africa: Evidence from Panel Data Analysis," Applied Economics and Finance, Redfame publishing, vol. 3(1), pages 145-160, February.
    5. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 82496, University Library of Munich, Germany, revised 2015.
    6. Dr. Najia Saqib & Maryam Masnoon & Nabeel Rafique, 2013. "Impact of Foreign Direct Investment on Economic Growth of Pakistan," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 3(1), pages 1-3.
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    More about this item


    FDI; Economic Growth; ARDL Bounds Testing Approach; Pakistan;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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