Abstract
The objective of this paper is to ascertain the impact of Chinese FDI on economic growth in Pakistan. This study documents the exploration of the determinants of economic growth in Pakistan by emphasizing the significant role played by Chinese FDI and investments in renewable energy in particular. This paper employs time series data analysis to examine the relationship between GDP and Chinese FDI, inflation, trade openness, exchange rates, interest rates, remittances, and renewable energy consumption from 1990 to 2019. The study involved performing the ARDL bounds test, and it was determined that the dependent and independent variables are linked in the long term. Furthermore, the error correction model is negative and noteworthy, which checks the long-run relationship between variables. According to the findings of the autoregressive distributed lag (ARDL) model, Chinese FDI has a substantial favorable effect on Pakistan’s economic growth. Furthermore, renewable energy usage has a long-term favorable and significant association with Pakistan’s economic growth. This study established that FDI, and particularly renewable energy, will stimulate the economic growth of Pakistan. Our research has substantial policy implications, especially when it comes to the relationship between FDI and renewable energy.
Highlights
Developing nations seek to increase capital inflows to boost economic growth because domestic savings are insufficient to fund their investment objectives
This study evaluates the impact of Chinese Foreign direct investment (FDI) on economic growth in the concurrence of seven variables: inflation, remittance, exchange rate, interest rate, renewable energy consumption, and trade openness
Chinese FDI is computed as net inflows as a percentage of GDP, interest rates mean the discount rate, exchange rates are as published, renewable energy is measured as domestic credits to the private sector as a percentage of GDP, and remittances are measured as a percentage of GDP
Summary
Developing nations seek to increase capital inflows to boost economic growth because domestic savings are insufficient to fund their investment objectives. Foreign direct investment (FDI) is typically channeled through overseas businesses, and science and technology can be exchanged as mechanical contraptions. It is not easy to exchange technology in ideas and processes from one country to another. Technology from other countries can assist in the upgrade of existing technology in a host country and lead to innovative research that produces new ideas and develops technological advances in the home nation (UNCTAD, 1999) [2]
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