Remittances, Employment rate, Literacy rate, Foreign Direct Investment and Economic Growth in Pakistan: An ARDL Co-Integration Analysis

Abstract

The key concern of this study is to examine the effect of remittances on Pakistan's economic growth between 1985 and 2017. The study examined the relationship between remittances and economic growth with the influence of employment rate, literacy rate and foreign direct investment on the interaction between them. Result of the long run co-integration indicates that the domestic investment and employment rate have significant and positive relationship with GDP in Pakistan. On the other hand, CUSUM plots remains within the bounds 5% level of significant and remains closer to the standard line that means the model that we used is structurally stable. Results of granger causality show the bi-directional relationship between domestic investment and FDI. This study suggested that the government should focus to increase the level of remittances, because remittances are the main determinants of economic growth in developing countries