An Analysis of Private Investment in Economic Growth in Three Major Sectors of Pakistan

Abstract

Investment is the edition in the stock of existing capital. This study especially focuses on private investment. Private investment plays a very crucial role in the determination of economic growth and poverty reduction in any economy. Private investment has both short and long-run implications for the economy. A country, in which private investment is well established, is more stable than a country with low private investment. This research aimed to determine the impact of private investment on the economic growth of three different sectors of Pakistan Agriculture, Manufacturing and Service Sectors. The study contains annual time series data (i.e., from 1975 to 2021 from an economic survey of Pakistan), on selected parameters such as private investment and GDP growth rate in different sectors of the economy. Augmented Dickey-Fuller (ADF) test results and the Vector Auto Regressive Model (VAR) were applied for estimations. The result suggested that economic growth increases positively with private investment. VAR estimation data indicates that private investment has a positive and significant impact on the service sector and a negative and significant impact on manufacturing. Based on the study results, Pakistan has to boost sustainable growth in the private sector, which led to increased economic growth.