Role of Foreign Direct Investment and Direct Investment in Economic Growth: A Case Study of Pakistan

Abstract

By analyzing annual time series data from 1980 to 2020, the major purpose of this study is to examine the influence of Foreign Direct Investment (FDI) and Domestic Investment (DI) in Pakistan's economic growth. The study applied ADF Test for stationary purpose and Ordinary Least Square (OLS) method to estimate the association between dependent and independent variables. CUSUM and CUSUM of Square also applied for Stability purpose. The results of OLS method show positive impact of Foreign Direct Investment (FDI) and Domestic Investment (DI) on economic growth. While, Inflation and Rate of Exchange has negative and significant impact on economic growth. The study suggests that the government should provide safe atmosphere for foreign investors to invest in Pakistan.