Relationship Between Foreign Direct Investment and Pakistan's Economic Growth

The objective of this research paper is to analyze relationship between Foreign Direct Investment (FDI) and Economic growth. Time series data for the period of 1980-2017 was used. Different variables like Inflation, Gross capital formation, Foreign Direct investment, Trade, Population growth and Gross Domestic Product (GDP) are used to check the impact of FDI on economic growth of Pakistan. We used ARDL approach, Bound test and Error correction Model to determine short run and long run effects of FDI on economic growth. Our results show that there is long-run and short-run significant relationship between FDI and Economic Growth. Other variables such as the inflation and the population growth rate have significant impact on GDP in the long run whereas the gross capital formation and foregin trade have no significant impact on economic growth of Pakistan in the long- run.