Ahmad, Arslan and Ahmad, Najid and Ali, Sharafat (2013): Exchange Rate and Economic Growth in Pakistan (1975-2011). Published in: Journal of Basic and Applied Scientific Research , Vol. 3, No. 8 (29 August 2013): pp. 740-746.
Download (407kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Exchange Rate and Economic Growth in Pakistan (1975-2011)|
|Keywords:||Economic Growth, FDI, Inflation, Pakistan|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
|Depositing User:||Mr. Najid Ahmad|
|Date Deposited:||01 Sep 2013 06:26|
|Last Modified:||25 Jan 2017 18:08|
Najid Ahmad, M. L. (2012). A dynamic analysis of the relationship among inflation, investment, population growth, export and economic growth in Pakistan. Asian Journal of Research in Business Economics and Management , 175-182.
Najid Ahmad, M. F. (2012). The causal links between foreign direct investment and economic growth in Pakistan. European Journal of Business and Economics , 20-21.
Abdul Khaliq, I. N. (2007). Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia. Indonesia Journal and Review , 01-27.
Niazi, G, S, K (2011). Does an Inflation and Growth of a country affect its Foreign Direct Investment? Journal of Management, Economics & Finance , 84-90.
Iqbal Mahmood, M. E. (2011). Macroeconomic variables and FDI in Pakistan . European Journal of Scientific Research , 388-393.
Shahzad Hussain, S. M. (2011). Inflation and Economic Growth: Evidence from Pakistan. International Journal of Economics and Finance , 262-276.
Mubarik, Y. A. (2005). Inflation and Growth: An Estimate of the. SBP-Research Bulletin , 35-44.
Naseer Seifollahi, F. A. (2012). Any Relation between Nominal Interest Rate and Inflation Rate upon Fisher Effect. Journal of Basic and Applied Scientific Research , 4000-4007.
Michael Bruno, W. E. (1998). Inflation crises and long-run growth. Journal of Monetary Economics , 03-26.
Huybens, E. and B.D Smith. (1999) Inflation , Financial markets and long run real activity. Journal of Monetary Economics.
Quartey, P. (2010). Price Stability and the Growth Maximizing Rate of Inflation for Ghana. Scientific Research Journal , 180-194.
Atish Ghosh, S. P. (1998). Warning: Inflation May Be Harmful. International Monetary Fund , 662-710.
Barro, R.J. (1995). Inflation and Economic Growth. National Bureau of Economic Research (NBER) Working Paper No. 5326.
Farhan Ahmed Mughal, N. A. (2012). Inflation, Inflation Uncertainty and Output Growth, Are they related? A study on South East Asian Economies, 1960-2010. Journal of Basic and Applied Scientific Research , 6108-6114.
Farooq, Z. H. (2009). Economic growth and exchange rate volatility in case of Pakistan. Pakistan Journal of life and social sciences , 112-118.
He, Q. (2010). Expanding varieties in the nontraded goods sector and the real exchange rate depreciation. Journal of international and global economic studies , 19-38.
Danson Musyoki, G. P. (2012). The impact of real exchange rate volatility on economic growth: Kenyan evidence. Business and Economic Horizons , 59-75.
Chen, J. (2012). Real exchange rate and economic growth: evidence from Chinese Provicial data (1992-2008). Paris School of Economics Working paper No: 2012-05 , 01-27.
S.Lai, Y.-W. C. (1998). Economic growth and stationarity of real exchange rates: Evidence from some fast-growing Asian Countries. Pacific Basin Finanace Journal , 61-76.
Tarawalie, A. B. (2010). Real exchange behaviour and economic growth: evidence from Sierra Leone. SAJEMS NS 13 (2010) NO 1 , 08-23.
Luqman, N. A. (2012). Secondary Education and Economic Growth in Developing Countries: A Case Study of Pakistan. Interdisciplinary Journal Of Contemporary Research In Business , 306-313.
Najid Ahmad, M. F. (2012). Energy Consumption and Economic Growth: Evidence From Pakistan. Australian Journal Of Business and Management Research , 09-14.
Najid Ahmad, M. L. (2012). Importance of Investment for Economic Growth: Evidence From Pakistan. Interdisciplinary Journal Of Contemporary Research In Business , 680-684.
Najid Ahmad, M. L. (2012). Returns to Education In Developing Countries: A Case Study Of Pakistan. Asian Journal Of Research In Business Economics and Management , 217-222.
Najid Ahmad, U.-T. S. (2012). Exports and Economic Growth in Pakistan: Evidence from Ordinary Least Squares and Granger Causality Tests. Asian Journal Of Research In Business Economics and Management , 61-69.
Najid Ahmad, U.-T. S. (2012). The Relationship Between Inflation and Economic Growth In Pakistan: An Econometric Approach. Asian Journal Of Research In Business Economics and Management , 38-48.