Financial Determinants of Economic Growth of Pakistan: An Empirical Analysis
Abstract
The paper attempts to investigate the relationship between savings and Economic growth of Pakistan by using the time series data from 1972 to 2015. For empirical analysis, ordinary least square method is used. The analysis is made in two parts. In the first part; descriptive statistics and correlation matrix are described. In second part, multivariate analysis explains how saving of Pakistan is determined by economic growth. This study concludes that the employed labor force, gross fixed capital formation and exchange rate have positive and significant influence on real gross domestic product. Foreign direct investment and gross domestic savings have negative but insignificant impact on real gross domestic product. Keeping in view the role of savings and economic growth in Pakistan. It is recommended that government should provide enabling environment and fiscal incentives for enhancing the foreign direct investment. This will increase the gross domestic product in the country. For this purpose, the industrial and agricultural sectors of the country must be stable. Moreover, there is a need of creating an investment friendly business environment in Pakistan.
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