Abstract
Theoretically Foreign Direct Investment (FDI) is considered as a growth accelerating component that has attained significant heed in the development of the country in the past decade. Pakistan has been selected due to its geostrategic location, which is a major attraction for developed economies to invest in for lucrative returns. This study objective is to trace the long as well short run analysis among FDI, Gross Domestic Product (GDP), Gross National Income (GNI) and Imports (IMP) of Pakistan from year 1987 to 2017 by using the ADF Unit Root Test, Johansan co-integration approach, VECM and Granger causality methods. The results reveal that the two-way causality between FDI and growth in Pakistan is not highly significant. Pakistan's economic growth indeed attracts FDI influx, which supports the market-size hypothesis; while the FDI influx stimulates the economic growth of Pakistan to some degree, the result is not significant. In light of the results achieved, this study suggests future recommendations to policy makers for an effective strategic plan to welcome foreign investments in Pakistan. Key words: Foreign direct investment (FDI), economic growth, vector error correction model (VECM), unit root test, co-integration analysis.  
Highlights
Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country in to business interests located in another country
The result of Augmented Dickey Fuller (ADF) test for FDI, Gross Domestic Product (GDP), Gross National Income (GNI) and IMP is not stationary I(0), „at level‟ but the same becomes stationary at the position I(1), „at first difference‟
The results indicate that there is no significant Granger causality from FDI to economic growth, in case of Pakistan
Summary
FDI is an investment made by a firm or individual in one country in to business interests located in another country. FDI constitutes a resource flow which is useful for the economic development of developing countries, especially for their industrial development. It provides a unique combination of long-. Pakistan's geostrategic location is a key to unlock central Asian states and can provide access between the Gulf States as well as African and European countries, so it is a major attraction for emerging economies to invest in for lucrative returns (Markey and West, 2016; Rahman and Shurong, 2017)
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