Impact of External Financial Resources on Economic Growth: The Case of Pakistan

Abstract

Financial resources are crucial for both developing and developed economies, whereas external financial resources are one of the drivers of economy for developing countries. Pakistan also heavily depends upon foreign capital inflows. Official Development Assistance, foreign direct investment, foreign reserves, workers’ remittances and external debt are the resources that flow from rest of the world to Pakistan. In order to capture the relationship among these variables with Growth Domestic Product of Pakistan, we used data over the period 1973 to 2016.Econometric techniques of ARDL Bound Testing Approach has been employed in the study. It has been obtained that external debt and FDI are significant long run determinant of economic growth in Pakistan.

Keywords: growth, financial resources, developing countries