An Analysis of Exploring the Relationship between Foreign Inflows and Sectoral Output of Pakistan

Abstract

The study aims at investigating the relationship between foreign inflows and sectoral output of Pakistan using time series annual data for the period from 1972 to 2013. Following Solow growth model, the results suggest positive relationship of employed labor force, investment, foreign direct investment, foreign aid and workers’ remittances with sectoral output of Pakistan while trade deficit is negatively correlated with sectoral output. According to some diagnostic statistics, the regression model is free from autocorrelation problem, residuals are normally distributed and there is no specification problem.

Keywords: Agriculture Sector Output, Industrial Sector Output, Services Sector Output, Foreign Direct Investment, Trade Deficit, Foreign Aid, Workers’ Remittances.

JEL Classification Codes: B13, C32, C82, E13, E22, E23, E24, F35.