Impact of Foreign Direct Investment on Economic Growth in Pakistan

Abstract

The paper examines the Impact of foreign direct investment (FDI) on economic growth in Pakistan. The study has used data from 2000 to 2010 by using Two- Stage least squares method of simultaneous equations the results have been estimated. The results show that there exists a negative relationship between economic growth, proxies by gross domestic product (GDP) and foreign direct investment in Pakistan. Domestic investment, exports size and political stability were found to be very appropriate in locational choice of foreign direct investment in Pakistan. The enhancement of foreign direct investment in Pakistan government should ensure political stability and encourage more domestic investment and also make sure about trade globalization and foreign direct investments policies in today’s era for attracting more foreign direct investment in Pakistan.

Keywords: FDI, GDP, Exports Growth and Domestic Investment.