A study on mapping out alliance between economic growth and foreign direct investment in Pakistan

Sustained economic growth is a trance of all the developing and developed countries of the world. The need is not just a fetch of economic growth rather is a realization of a fact that the why some economies that receive heavy amount of foreign capital inflows in term of foreign direct investment (FDI) still find hard to capture the economic growth targets.This research captures for the state of the position of economic growth in terms of FDI and other internal factors in Pakistan. The study is based on the time series analysis covering the range of data from 1972 to 2014. Johansen Juselius technique of co-integration is employed for the precise statistical findings.Unit root test is computed in terms of Augmented Dickey Fuller Test (ADF). Granger Causality test and Error Correction Model (ECM) is employed to test for the short-run and long-run relationships and causality between the variables selected in the equation of growth. The results of the study show that FDI and GDP possess positive association in short-run as well as in long-run. Unidirectional causality is also found on account of FDIand GDP. The study suggests that the government of Pakistan is to further pave off the ways that it already practices to attract FDI that is prerequisite for sovereign upcoming scenery of the country