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FDI, International Trade and Economic Growth in Pakistan
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The role of foreign direct investment (FDI) in economic growth has been analyzed in various contexts. It is presumed as an important mean of obtaining capital, technology, skilled management, improved marketing know-how and outlets for non- traditional exports. The link between FDI and trade follows two channels. First, the countries that are more open are more likely to attract FDI, where the degree of openness means the size of trade relative to GDP. Second, FDI can affect trade through technology transfer. Current research focuses on the relationship among FDI, international trade and economic growth for the economy of Pakistan. The above objectives are addressed using two frameworks. One of these frameworks is based on a set of simultaneous Equations Determining the key variables. The second framework follows co-integration analysis. The analysis is based on annual time series data for the period 1949-50 to 1997-98. The results show that economic growth and increase in the volume of trade are major factors attracting FDI. Domestic resource mobilization is a long term solution to attain the goal of economic development.
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