Impact of Political Structure and Foreign Direct Investment on Growth in Pakistan
Author: Nilofer

Savings and investment are vital ingredients of growth in an economy. Saving contributes to investment which contributes to physical and human capital formation both of which promote growth of Gross Domestic Product (GDP) of a country. This thesis aims at determining the role of the three types of investment i.e., public, private and foreign direct investment (FDI) in the growth of Pakistan economy with a special focus on the contribution of FDI and political structure of the country in terms of democracy and dictatorship in GDP growth of the country. Cointegration analysis of time series data was used to analyze two models; one without controlling for political structure, and the other incorporating a dummy variable for political structure (democracy/dictatorship). Autoregressive Distributed Lag (ARDL) Bounds Testing Approach has been used to analyze the relationship between GDP growth, investment, government expenditure and political structure for Pakistan using data from the Government of Pakistan and the State Bank of Pakistan (1970-2015). The results indicate that while public and private investment and lending rate have a positive impact on growth, public consumption and FDI decelerate GDP growth. And political structure dummy turned out to be positive and highly significant implying that in case of Pakistan dictatorship regimes are associated with positive growth rate and vice versa. The study recommends building infrastructure, bringing about reforms and restructuring the existing infrastructure to boost the positive impact of FDI and help bring in more of it. Also the investor confidence should be bolstered by improving the law and order and security situation of the country and introducing investment friendly policies to further harness the positive impact of investment on growth. Supervisor:- Dr. Abdul Qayyum

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Keywords : Autoregressive Distributed Lag Bounds Testing, Cointegration, Growth, Pakistan, Political Structure (Democracy/Dictatorship)
Supervisor: Abdul Qayyum

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