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National Savings And Foreign Capital In Pakistan

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  • AFZAL, Muhammad

Abstract

This paper has addressed the nature of the casual relationship between national savings and foreign capital in Pakistan over the period 1960 -2010 using the Granger no-causality test based on Toda and Yamamoto (1995) procedure. The results show that no causality is found from foreign capital to savings but savings causes foreign capital when we consider the whole period (1960-2010). But for 1973-90 periods, both caused each other. No causality is found between foreign capital and savings but savings Granger-cause foreign capital in 1990-2010 periods. Income and savings Granger cause each other for all periods. The investment-savings relationship is mixed. Foreign capital is not a permanently dependable source. Pakistan has to rely on its own savings though the need for foreign capital will continue to haunt. An adequate reduction in non-development expenditure would release resources for productive investment that would raise production and employment and would result in the virtuous circle of saving-investment-growth-savings.

Suggested Citation

  • AFZAL, Muhammad, 2013. "National Savings And Foreign Capital In Pakistan," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 197-206.
    • Handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_14
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    More about this item

    Keywords

    Savings; Foreign capital; Granger no-causality; Pakistan.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid

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