THE IMPACT OF FOREIGN DIRECT INVESTMENT AND REMITTANCES ON GDP GROWTH RATE OF SOUTH ASIAN ECONOMIES: AN ECONOMETRIC ANALYSIS

Dr. Nazia Sultana, Dr. Khurram Shakir and Abdul Samad Shaikh Ibrahim Noorani
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Dr. Nazia Sultana: Benazir Bhutto Shaheed University Lyari Karachi
Dr. Khurram Shakir: Benazir Bhutto Shaheed University Lyari Karachi
Abdul Samad Shaikh Ibrahim Noorani: Benazir Bhutto Shaheed University Lyari Karachi

ILMA Journal of Social Sciences & Economics (IJSSE), 2021, vol. 1, issue 1, 92-144

Abstract: The quantitative research study was undertaken to determine the impact of Foreign Direct Investment (FDI), Remittances, Inflation, Interest Rate and Exchange Rate on GDP Growth Rate of South Asian Economies i.e. Pakistan, India, Srilanka and of Chinaand of which FDI and Remittances were our main interested independent variables whereas Inflation, Interest Rate, and Exchange Rate were used as controlled variables, and GDP Growth Rate was used as a dependent variable .Since FDI and Remittances are the essential macroeconomic variables for determining the GDP Growth Rate of any country, therefore, we took these variables to see their impact on the GDP Growth Rate of South Asian Economies. Meanwhile, we extracted the yearly data of FDI, Remittances of South Asian Economies from 2001 to 2019 time period. Firstly, we performed Unit Root for checking the stationarity of the data and the results of this test revealed that the data was stationary except the data of Remittances which were made stationary after taking its 1st difference. The results of the Co-integration table revealed that there was no long-term relationship between independent variables and the dependent variable, and FDI and Remittances could not explain the long-term relationship with GDP Growth Rates and the results revealed that at 1st and 2nd difference hypothesis were rejected. Lastly, VECM Test (Model) was applied to evaluate the short-term relationship (short-run) that whether relationship and impact existed between independent and dependent variable or not, and the results of table revealed that FDI was significant i.e. FDI had a short-run relationship with GDP Growth Rate while Remittances were insignificant which suggested that there was no shortrun relationship of Remittances with GDP Growth Rate of South Asian Economies.

Keywords: Foreign Direct Investment (FDI); Remittances; GDP Growth Rate. (search for similar items in EconPapers)
Date: 2021
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