Impact of Foreign Direct Investment on Economic Growth of Pakistan

Advances in Management & Applied Economics, Vol.3, No.1, 2013, 35-45

11 Pages Posted: 28 Jan 2013

See all articles by Najia Saqib

Najia Saqib

Prince Sultan University

Maryam Masnoon

Bahria University Karachi Campus

Nabeel Rafique

Bahria University

Date Written: January 20, 2013

Abstract

Given contrasting evidence in the literature pertaining to the impact of Foreign Direct Investment on the host country’s economy, we take the case of Pakistan and test the said association for this nation. The data used for this study has spanned over the period of 1981 till 2010. Besides FDI, four other variables including Debt, Trade, Inflation and Domestic Investment have been included in the study, to regress upon GDP of this country. The methodology to test the impact of these variables on Pakistan’s economy has been limited to the least squares method. The co-integration of the variables has been ascertained through application of Augmented Dickey Fuller Test and is found to hold in the long run. Our findings indicate that Pakistan’s economic performance is negatively affected by foreign investment while its domestic investment has benefitted its economy. Moreover, the nation’s debt, trade and inflation have found to have negative impact on its GDP.

Keywords: foreign direct investment (FDI), economic growth, Granger causality

JEL Classification: F21, O17, O19

Suggested Citation

Saqib, Najia and Masnoon, Maryam and Rafique, Nabeel, Impact of Foreign Direct Investment on Economic Growth of Pakistan (January 20, 2013). Advances in Management & Applied Economics, Vol.3, No.1, 2013, 35-45. Available at SSRN: https://ssrn.com/abstract=2207626

Najia Saqib

Prince Sultan University ( email )

PO Box 66833
Prince Sultan University
Riyadh, Riyadh 11586
Saudi Arabia

Maryam Masnoon (Contact Author)

Bahria University Karachi Campus ( email )

National Stadium Road
Karachi
Pakistan

Nabeel Rafique

Bahria University ( email )

E.8 Shangrilla Road
Naval Complex
Islamabad, 44000
Pakistan

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