Impacts of exports and foreign direct investment (FDI) on economic growth of Pakistan

Economic Growth rate is very widely recognized indicator to measure the health of the economy. Higher growth rate is considered to be the necessary- though insufficient- condition for realizing the overall objective of economic development. Among the many variables that affect the GDP growth rate, export and Foreign Direct Investment (FDI) are thought to be the most important in the literature of economics. They contribute, among others, in generating employment opportunities, raising foreign exchange reserves, increasing technological spillovers and improving the marketing skills. Are these favorable impacts of exports and FDI realized in the case economic growth of Pakistan? There is a growing body of literature around this question which often presents mixed findings. Keeping this in view, the present study was designed to estimate the quantitative impacts of exports and FDI on the economic growth of Pakistan. For the purpose of analysis, Co-integration technique was applied on the secondary data ranging from 1975 to 2010, gathered from various sources. The results of the study showed that there is significant impact of export and FDI on the economic growth of Pakistan. It is suggested that relatively more focus should be given to broad based, processed and value added export. Moreover, FDI should come in export oriented sectors such as agriculture. © IDOSI Publications, 2013.