Abstract
The research investigates the causality relationship between FDI, Trade Economic growth in Pakistan. Using quarterly time series data from 1998 to 2009, this paper examines the causality relationship between foreign direct investment, international trade and economic growth in Pakistan. In VAR model, the integration and Cointergration analysis suggested that there is a long run relationship among the factors. The results of VECM causality test find bidirectional causality between foreign direct investment, export and economic growth, with are two important factors that enhance the affect of economic growth in Pakistan. Foreign Direct Investment has positive impact on the trade growth in Pakistan. It was revealed that government should play a positive role in proving security to the investors around the globe. It was further revealed that FDI should invest in various parts of Baluchistan as well as rural part of Sindh province.
Highlights
ISSN 1911-2017 E-ISSN 1911-2025 www.ccsenet.org/ass product (GDP), GDP per capita, foreign direct investment and important trade and economic agreements signed with major partners
The results suggested that FDI invested in Pakistan was attracted by its economic growth and its foreign trade strategy
The purpose of this study is to examine the link between FDI, trade and economic growth in Pakistan
Summary
ISSN 1911-2017 E-ISSN 1911-2025 www.ccsenet.org/ass product (GDP), GDP per capita, foreign direct investment and important trade and economic agreements signed with major partners. During FY04-06, Pakistan has cumulatively attracted $8 billion foreign investment flows - 26.5% was sale proceeds of public assets and 49.2% from FDI, with remaining coming from foreign portfolio investment These foreign inflows have come into banking, telecom and oil and gas sectors primarily. The amount of foreign investment rose from a tiny $10.7 million in 1976/1977 to $1296 million in 1995/1996, growing at the annual compound growth rate of 25.7 percent. It declined to $950 million in 1996/1997. While FDI flows to all developing countries reached $233.2 billion in 2004, East and Southeast Asia received the bulk of this share, total foreign investment consists of direct and portfolio investment. FDI, on average, accounted for more than 100% of total inflows over the period 2001-02 to 2006-07
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