A Disaggregated Analysis of Foreign Direct Investment and Economic Growth in Pakistan: New insights from Tota and Yamamoto Causality

Authors

  • Hina Ali Department of Economics, The Women University Multan, Pakistan
  • Fouzia Yasmin Department of Economics, University of Sahiwal, Sahiwal, Pakistan
  • Mahmood ul Hasan Department of Economics, University of Sargodha, Sargodha, Pakistan

DOI:

https://doi.org/10.52700/scir.v3i2.49

Keywords:

Foreign Direct Investment, Low Skill, Medium Skill, High Skill FDI

Abstract

This study endeavors to examine the impact of foreign direct investment at aggregated as well as disaggregated level are estimated for economic growth in Pakistan. The data for the period of 1980-2017 was utilized for the analysis. Foreign direct investment at a disaggregated level, i.e. foreign direct investment in low skill-intensive sectors (FDILS), foreign direct investment in medium skill-intensive sectors (FDIMS), and foreign direct investment in high skill-intensive sectors (FDIHS) has been taken as the core variables of the study. Tota and Yamamoto were used to establishing the relationship among the variables in long and the short run. The long-run results of TY causality indicate that TFDI has a positive impact on economic growth. FDILS have a negative impact while FDIMS and FDIHS have a positive impact on the economic growth of Pakistan. The causality results with aggregate FDI explored that a unidirectional causality exists between TFDI and GDP, and the direction of causality running from GDP to TFDI. The causality results with disaggregate FDI indicate that a bidirectional causality exists between GDP, FDILS, FDIMS, and FDIHS. The study discussed some of the issues related to economic growth and FDI in Pakistan. Suggested some measures boost economic growth having specific consideration on low skill, medium skill, and high skill FDI as it has a significant contribution to economic growth. Recent research studies associations among FDI and economic growth in the context of Pakistan.

Published

2021-12-30