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An Empirical Analysis of Pakistan

Abstract:

This study aims to examine the role of three significant external resources on the economic growth of Pakistan. A sample of Pakistan is studied from 1976 to 2018. Empirical analyses are carried. First, the Unit Root test was run to check the trend in the data of all variables. Second, the Cointegration test was run to check the long-term relationship between variables. Finally,

Regression test was run to ensure that all variables have a linear relationship, data is normally distributed, data is scale and variables have long term relationships. Results suggest that remittances play a vital role in the economic growth of Pakistan, whereas, imports and foreign direct investment found to be insignificant. Hence, Remittances significantly contribute to the economy of Pakistan and imports found to be negatively related to economic growth in the same economy.

Keywords: External Resources; GDP; FDI; Remittances; Imports; Cross-Sectional Dependence; Heterogeneity; Pakistan

Introduction

Background:

Economic growth is unavoidable for attaining the general economic progress of the country. However, it’s a significant challenge for the countries to realize the desired economic process for an extended fundamental measure. Denault (2011) acknowledged that foreign capital plays an essential role in economic development and any argued that foreign capital is a crucial determinant of the economic process despite its origin.

Problem Statement:

Many studies have been conducted related to the effects of external resources on the economic growth of different countries. The variables used in different studies are FDI, remittance, imports, foreign aid, and external debts. However, in the best of my knowledge, there is no research conducted on the topic of external resources on economic growth and how it influence intentions to apply in Pakistan scenario.

Research Objective:

The purpose of this study is:

  • To examine the impact of foreign capital factors those are foreign direct investment, remittances, and imports from the perspective of Pakistan’s GDP.

Research Question:

Q. What is the impact of foreign capital factors mentioned below on the economy of Pakistan?

  • FDI
  • Remittances
  • Imports

Scope of the Study:

This study is important to know how external factors (FDI, remittances, and imports) influence and contributes effectively to the prospective GDP of Pakistan.

Limitation of the Study:

The time and sample size are limited in this research because it is done on only three important variables and in a limited time period, however, this study can be adopted by any region. The data sets of the entire studied variables taken from the World Bank (World Development Indicator, WDI) from 1976 to 2018 on an annual basis.

For Further Reading:

External Resources and Economic Growth – Part 2

External Resources and Economic Growth – Part 3

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