Exchange Rate and Economic Growth in Pakistan (1975-2011)
Najid Ahmad and
MPRA Paper from University Library of Munich, Germany
This paper investigates the impact of inflation, nominal exchange rate, FDI and capital stock on economic growth of Pakistan by using time series data for the period of 1975-2011. Augmented Dickey Fuller (ADF) test is applied to check the stationary of variables. All variables found stationary at level. So Ordinary Least Squares method is applied to check the relation between dependent variable (GDP) and independent variables (Exchange rate, FDI, capital stock). The results of OLS show that inflation and exchange rate has negative and significant affect economic growth of Pakistan. One percent increase in inflation will decrease GDP by 0.29 percent. Exchange rate coefficient is -0.5504 that means one percent increase in exchange rate will reduce GDP by 0.55 percent. Capital stock (GFCF) does not significantly affect economic growth. Foreign direct investment has positive and significant effect on economic growth of Pakistan. The results show that one percent increase in FDI will raise GDP by 0.37%. Our model is free from hetroskedasticity and autocorrelation with satisfactory functional form that suggests the stability of the model. The CUSUM and CUSUMSQ are showing that the model is structurally stable within the 5% of critical bounds. Government should take significant steps to increase the standard of exporting goods to make smooth balance of trade.
Keywords: Economic Growth; FDI; Inflation; Pakistan (search for similar items in EconPapers)
JEL-codes: O1 O11 O4 (search for similar items in EconPapers)
Date: 2013-06, Revised 2013-07
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Published in Journal of Basic and Applied Scientific Research 8.3(2013): pp. 740-746
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/49395/1/MPRA_paper_49395.pdf original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:49395
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().