Does Foreign Direct Investment Promote Economic Growth: Evidence from Pakistan Based ARDL to Cointegration Approach

Abstract

The study intends to examine economic growth in terms of national savings in the context Pakistan. It applies yearly data from 1972 to 2021. By means of Auto-Regressive Distributed Lag (ARDL) method the impact of national savings, foreign direct investment as well as employed labor force on economic growth of Pakistan is observed. The findings direct to conclude that there is significant long run relationship exist between national saving, foreign direct investment, employed labor force and economic growth in Pakistan. It suggests that employed labor force encourages foreign direct investment over long run period and savings increases real activity equally before and after the break, whereas economic growth causes saving. Thus, the current study also recommends that productivity-based and incentive-based measures are useful in producing more savings and supporting acceleration of income as well as growth.