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Title COMPOSITE IMPACT OF FOREIGN DIRECT INVESTMENT AND POLITICAL STABILITY ON ECONOMIC GROWTH OF PAKISTAN

Author(s) Hiba Imtiaz

Abstract The main objective of the study is to find the composite impact of foreign direct investment and Political stability on economic growth of Pakistan and secondly to investigate the impact of Foreign direct investment and political stability on the economic growth of Pakistan separately. Foreign direct investment has major and positive impact on growth, but this impact will be greater if there is political stability in the economy because in a developing country like Pakistan political stability plays a principal role in determination of economic growth and sources of capital accumulation. Therefore, the study draws the attention of policymakers towards the composite impact that emphasizes on FDI and political stability to increase the economic growth of Pakistan. The composite impact of FDI and political stability on economic growth is examined for the period of 1980 to2016 using ARDL (Auto Regressive Distributed Lag). Three models have been developed for three different reasons. First model is developed to check the impact of FDI on economic growth, second model is to check the impact of political stability on economic growth and the last model is developed to check the composite impact of FDI and political stability on economic growth. To find the presence of long run relationship among variables, the bound testing approach is applied while ECM (Error Correction Model) is used to find out the short-run relationship among variables. The results of long-run relationship indicate that foreign direct investment has a positive but insignificant relationship with economic growth, while political stability has significant and positive relationship with economic growth, and interactive term has also shown positive and significant relationship with economic growth. In the short run, 12 percent disequilibrium is being corrected annually. The findings recommend that the government should need to strengthen political system and institutions, improve the law and order situation in the country in this way FDI will flourish and there will be imperative impact on economic growth of a country. Key Words: Interactive Term, Foreign Direct Investment, Political Stability.

Type Thesis/Dissertation MS

Faculty Management Sciences

Department Economics

Language English

Publication Date 2019-09-13

Subject Economics

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