Abstract

Sustained economic growth is a trance of all the developing and developed countries of the world. The need isnot just a fetch of economic growth rather is a realization of a fact that the why some economies that receiveheavy amount of foreign capital inflows in term of foreign direct investment (FDI) still find hard to capture theeconomic growth targets. This research captures for the state of the position of economic growth in terms of FDIand other internal factors in Pakistan. The study is based on the time series analysis covering the range of datafrom 1972 to 2014. Johansen Juselius technique of co-integration is employed for the precise statistical findings.Unit root test is computed in terms of Augmented Dickey Fuller Test (ADF). Granger Causality test and ErrorCorrection Model (ECM) is employed to test for the short-run and long-run relationships and causality betweenthe variables selected in the equation of growth. The results of the study show that FDI and GDP possesspositive association in short-run as well as in long-run. Unidirectional causality is also found on account of FDIand GDP. The study suggests that the government of Pakistan is to further pave off the ways that it alreadypractices to attract FDI that is prerequisite for sovereign upcoming scenery of the country.

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