Munich Personal RePEc Archive

Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan

Rahman, Mohammad Mafizur and Shahbaz, Muhammad (2011): Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan.

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Abstract

The paper investigates the effects of imports and foreign capital inflows on economic growth in case of Pakistan over the period of 1990Q1-2008Q4. We have applied ARDL bounds testing approach to examine the long run relationship and investigated the direction of causality by using VECM multivariate framework.

Our analysis confirms the long run relationship between imports, foreign capital inflows and economic growth. The results show that imports and foreign capital inflows have positive and significant effect on the economic growth of Pakistan. Causality analysis reveals bidirectional causal association among the variables, but strong causality is found from imports and foreign capital inflows to real GDP.

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