IMPACT OF FOREIGN DIRECT INVEST (FDI) AND EXTERNAL DEBT ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM PAKISTAN

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