The Role of FDI in Economy of Pakistan for the Period of 1971-2018

Abstract

Foreign direct investment (FDI) affects the economic growth of the host economy through technology transfer, human resource formation, global market integration and enhancement of competition. A variety of previous empirical studies indicate that FDI is an essential source in the host country’s economic growth. Some studies also came up with the ambiguous results, provided that the current study aims to investigate the impact of foreign direct investment on the economic growth of Pakistan. The study utilizes time series data over the period of 1971 to 2018. Autoregressive Distributed Lag-Error Correction Model (ARDL-ECM) technique has been applied to investigate the short-run and long-run effects. The results of the study show that FDI has a positive and a significant impact on the economic growth of Pakistan in both short-run and long-run analysis.