THE ROLE OF FOREIGN INVESTMENT ON ECONOMIC GROWTH OF PAKISTAN: AN EMPIRICAL ANALYSIS FOR THE PERIOD OF 1976 – 2016

Abstract

The paper aims to examine empirically the nexus between foreign direct investment, domestic investments and economic growth in Pakistan by using time series data. An OLS technique is used to analyze the relationship between FDI, Public & Private investment, Personal remittances with gross domestic products panning from 1976-2016. For a data to be stationary, ADF test has been used and validated that all variables are stationary at level. Results of the study shows that both public and private sector investment are positively related with GDP but Public sector investment have an insignificant effect on GDP, while FDI found inversely and insignificantly correlated with GDP. Personal remittances (PR) relate negatively and have a significant impact on GD. Private investment are found to be the most significant variable which can effect GDP, showing that private investment can fueled economic growth of Pakistan. Hence, the Government of Pakistan needs to formulate such a policy frame work, which focuses on private sector investment in order to enhance economic growth.