Abstract:
Purpose
This study examines relationship of economic growth with foreign direct investment and
External debtfor Pakistan over the time span 1976-2017. FDI and external debt have been
used as independent variable along with Inflation as a proxy ofMacroeconomic Stability
control variable whereas GDP used as a dependent variable.
as a
Methodology & Design
The study employed multiple regression techniques to examine the relationship between the
variables. All variables are in logarithmicform except inflation. Logarithmicform has some
advantages treated as elasticity and each of them shows such as estimated coefficients
percentage change. Additionally, logarithmic form decreases the variability in data and
potentially lessens the likelihood ofthe problem ofheteroscedasticity in the specified model.
Moreover, diagnostic tests employed to check multicollinearity, normality, autocorrelation
are
and heteroscedasticity.
Findings
The result ofthe study shows that FDI is a positive contributor in Pakistan economy. FDI has
GDP of Pakistan. However, GDP of Pakistan negatively positive significant impact
the accumulation of external debt. Inflation (macroeconomic instability has
on
affected by
negative significant impact on Pakistan economy.
Limitations:
The study employed veryfew variables offoreign inflows. The findings ofthis paperfurther
strengthen by using in future research
financial inflows such as Remittances andforeign aid in the country.
Recommendations
policy makers in Pakistan should employ policies to encourage FDI inflows. In order to
strict check needed to make on inflation. Likewise,
recommended.
more econometric variable covering complete
The
maintain macroeconomic stability a
efficient utilization of debt stock is
