The Causal Links Between Foreign Direct Investment And Economic Growth In Pakistan

Najid Ahmad,Muhammad Luqman,Muhammad Farhat Hayat,Shafqat Ullah

doi:10.12955/ejbe.v6i0.137

Abstract

This paper investigates the relationship between foreign direct investment and economic growth in Pakistan. The co-integration and error correction model is used to show the relationship between foreign direct investment and gross domestic product in Pakistan. Gross domestic product is taken as dependent variable while foreign direct investment, labor force and domestic capital as independent variables. The results suggest that there is a positive relation between foreign direct investment and gross domestic product in short as well as long run. If we want to make economic progress then there is a need to invite foreign investors because foreign direct investment increases GDP that is economic growth.

Highlights

Foreign direct increase there will be increase in foreign direct investment while there is a negative relation in FDI and inflation
The results suggest that there is a positive relation between This paper is closely related to Niazi (2011) paper who foreign direct investment and gross domestic product in discuss the relationship among foreign direct investment, short as well as long run
The results of the above table reveal that Labor force; domestic capital investment and foreign direct investment are stationary at first difference 5% level of significance while G is stationary at second difference 5% level of significance so appropriate technique for estimation is co-integration

Summary

INTRODUCTION

Foreign direct increase there will be increase in foreign direct investment while there is a negative relation in FDI and inflation. Investment and other variables are negatively related with foreign direct investment while Abu Nurudeen (2010) examines the relationship between foreign direct investment and economic growth in Nigeria over the period 1970-2008. He employed the co-integration and Granger causality. Techniques to analyze the relationship between FDI and Methodology and model economic growth The resluts of his findings suggest that they are co-integrated and there is a postive relation between foreign direct investment and economic growth in Nigeria.

Domestic k

Foreign direct investment

Coefficient Standard error

Conclusion