Impact of FDI and export on economic growth: Evidence from Pakistan and India

Abstract

FDI and export play the significant role in economic growth. This research synthesizes the relationship between FDI, export, and economic growth (per-capita income). For this purpose data were used from 1990–2015 which were obtained from World Bank indicators. Johansen cointegration, Granger causality, and unit root were applied for analyzing the results. The results reveal that Pakistan and India FDI and export have long term relationship with per-capita income. Granger casualty results demonstrate that Pakistan FDI and export has a unidirectional relationship with economic growth (Per capita income). The findings also recommend that Pakistan and India FDI have long run relationship with economic growth (Per capita income). The vector error correction model findings suggests that −27% changes in the short run to long run growth at an equilibrium point of Pakistan. India vector error correction model results also show that −31.1% short run to long run growth at the equilibrium point.