Effect of domestic and foreign private investment on economic growth of Pakistan

Abstract

The foreign and domestic investments have a significant contribution towards economic development for developing and developed economies especially for underdeveloped economies. The primary objective of this study is to investigate the causal connection between domestic and foreign private investment along with its impact on economic growth of Pakistan. Moreover, time-series data has been used from 1980 to 2017 and autoregressive distributed lags (ARDL) method is implied for the data analysis perspective. The long-run findings indicate that foreign private investment has a negative and insignificant impact on economic growth, whereas, domestic investment shows a statistical significance but positive impact on Pakistan economy. The short-run dynamic designates that both domestic and foreign private investment is significantly and positively associated with the growth rate. Whereas, error correction term (ECT) is correcting the disequilibrium of data 42.7% on annual basis. Finally, F-test shows that the overall model of this study is statistically significant.

Keywords:

• Domestic investment
• foreign private investment
• economic growth
• ARDL

Acknowledgement

The authors are grateful to the anonymous referees and the editorial team of the journal for their extremely useful suggestions to improve the quality of the article. The authors have not received any financial support for the research, authorship and/or publication of this article.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability

The data is available on request.

Notes on contributors

Mr. Malik Shahzad Shabbir is visiting Lecturer of Economics and Finance at University of Lahore, Pakistan. Mr. Malik has published several impact factor papers in high rank (A, Q1) categories journals. His area of research belongs to Economics and Finance. Mr. Malik is also corresponding author of this paper.

Miss Misbah Bashir is doing her PhD Economics from Pakistan Institute of Development Economics (PIDE) Islamabad Pakistan. Previously, she has completed her Master degree in Economics from University of Lahore.

Miss Hina Munir Abbasi is doing her PHD Finance from Comsats University, Islamabad Campus. She is working as visiting Lecturer at Allama Iqbal Open University and National University of Modern Language, Pakistan respectively.

Dr. Bilal Ahmed Abbasi completed his doctoral studies in the field of Management from UTM, Malaysia. His research areas of interest include entrepreneurship, strategy and organizational management. Currently, he is serving as Assistant Professor (Management) at Department of Management Sciences, The University of Azad Jammu and Kashmir. He has published 6 research papers and presented two papers in academic conferences.

Dr. Ghulam Yahya Khan has completed his doctoral studies in the field of economics from Kingston University, London, United Kingdom. His area of research interest includes time series analysis with structural breaks, growth analysis and econometrics. He has 16 years of teaching experience in economics and economics related subjects at postgraduate level. Currently, he is serving as Assistant Professor (Economics) at Kashmir Institute of Economics, University of Azad Jammu and Kashmir (UAJ&K).