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Impact of FDI on Economic Growth: Evidence from Pakistan

Author

Listed:
  • Hafiz Muhammad Abubakar Siddique

    (Federal Urdu University, Islamabad, Pakistan)

  • Romana Ansar

    (Punjab Group of Colleges, Bhara Kahu Campus, Islamabad, Pakistan)

  • Muhammad Mustasim Naeem

    (National College of Business Administration and Economics, Lahore, Pakistan)

  • Sajid Yaqoob

    (University of Lahore, Islamabad, Pakistan)

Abstract

This study investigates the nexus between foreign direct investment and economic growth for Pakistan for 1980-2016. Using autoregressive distributed lag bounds co-integration and granger causality test. The results of ARDL bounds test shows the existence of co-integration between economic growth, FDI, trade, physical capital and human capital. The results indicate the unidirectional causality from economic growth to FDI, to physical capital and to trade. The findings also express the one-way causality from human capital to labour force and physical capital. The bidirectional causality is found between physical capital and FDI, and between physical capital and human capital. The study suggests to adopt such policies that enhance human skills to attract more FDI for economic growth.

Suggested Citation

  • Hafiz Muhammad Abubakar Siddique & Romana Ansar & Muhammad Mustasim Naeem & Sajid Yaqoob, 2017. "Impact of FDI on Economic Growth: Evidence from Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(3), pages 111-116, September.
    • Handle: RePEc:rfh:bbejor:v:6:y:2017:i:3:p:111-116
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    References listed on IDEAS

    as
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    3. Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Gifty Atta Mills & Xicang Zhao, 2013. "Impact of Foreign Direct Investment on Economic Growth: Empirical Evidence from Ghana," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 18-25, January.
    4. Seiko Minota Zekarias, 2016. "The Impact of Foreign Direct Investment (FDI) on Economic Growth in Eastern Africa: Evidence from Panel Data Analysis," Applied Economics and Finance, Redfame publishing, vol. 3(1), pages 145-160, February.
    5. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 82496, University Library of Munich, Germany, revised 2015.
    6. Dr. Najia Saqib & Maryam Masnoon & Nabeel Rafique, 2013. "Impact of Foreign Direct Investment on Economic Growth of Pakistan," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 3(1), pages 1-3.
    7. Abdul Khaliq & Ilan Noy, 2007. "Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia," Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
    8. Johnson, Andreas, 2006. "The Effects of FDI Inflows on Host Country Economic Growth," Working Paper Series in Economics and Institutions of Innovation 58, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kaltrina Kajtazi & Besnik Fetai, 2022. "Does the Remittance Generate Economic Growth in the South East European Countries?," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(1), pages 57-67, March.
    2. Xiuyun Yang & Muhammad Nouman Shafiq, 2020. "The Impact of Foreign Direct Investment, Capital Formation, Inflation, Money Supply and Trade Openness on Economic Growth of Asian Countries," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 2(1), pages 25-34, June.
    3. Oteng-Abayie, Eric & Awuni, Prosper Ayinbilla & Adjei, Thomas Kwame, 2020. "The Impact of Inward Remittances on Economic Growth in Ghana," African Journal of Economic Review, African Journal of Economic Review, vol. 8(3), November.
    4. Shakil Ahmad & Muhammad Waqas Khan, 2021. "Investigating The Effect Of Foreign Direct Investment (Fdi) And Foreign Remittances On Economic Growth In Pakistan (1990-2018): A Time Series Analysis Using Ardl Model Approach," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(1), pages 1-7, March.
    5. Riaz, Kainat & Siddique, Hafiz Muhammad Abubakar & Audi, Marc & Sumaira, Sumaira, 2024. "Impact of Financial Development on Export Performance: Evidence from South Asia," MPRA Paper 122474, University Library of Munich, Germany.
    6. Abdur Rauf & Hafiz Muhammad Abubakar Siddique & Qasim Saleem & Sidra, 2020. "Terrorism and International Tourism Nexus: Evidence from Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 387-393.
    7. Awad, Atif & Albaity, Mohamed, 2022. "ICT and economic growth in Sub-Saharan Africa: Transmission channels and effects," Telecommunications Policy, Elsevier, vol. 46(8).

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    More about this item

    Keywords

    FDI; Economic Growth; ARDL Bounds Testing Approach; Pakistan;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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