Foreign Direct Investment and Economic Growth: Evidence from Pakistan

Abstract

This study finds the relationship between FDI and other indicators of economic growth i.e. employment rate, exports and foreign reserves with GDP through Johansen cointegrration and VECM over the period of 1963-2014. Unit root was checked through ADF test and all variables are integrated at 1^st different. The results confirmed that an increase in FDI has positive impact on the economic growth of Pakistan both in the short and long run. Our results are likely to provide an opportunity to frame some policy implications. Hence the authorities should positively concentrate on maximum utilization of resources to increase FDI in order to increase GDP growth rate.