Financial Integration, Domestic Investment and Growth of Pakistan Economy

Gulzar Ali; Awoesha Rahat; Said Zamin Shah

doi:10.36902/rjsser-vol1-iss3-2020(136-142)

Gulzar Ali Department of Economics, Islamia College University Peshawar, Khyber Pakhtunkhwa, Pakistan
Awoesha Rahat Department of Management Sciences, Women University Mardan, Khyber Pakhtunkhwa, Pakistan
Said Zamin Shah Department of Economics, Islamia College University Peshawar, Khyber Pakhtunkhwa, Pakistan

DOI: https://doi.org/10.36902/rjsser-vol1-iss3-2020(136-142)

Keywords: Financial Integration, Domestic Investment, Political and Economic Stability, Economy of Pakistan

Abstract

This study, in the context of Pakistan, analyzes to which extent the financial integration and domestic investment are responsible for the phenomenal growth rate of Pakistan economy. The relationship is based on time series data covering a period from 1980 to 2018. In analytical techniques, the Augmented Dicky-Fuller unit root test for the stationarity of data, Johansen Co-integration for co-integrating factor, and Vector Error Correction Model (VECM) for phenomenal relation between domestic investment, financial integration and growth of Pakistan economy were applied. The results obtained through regression analysis were statistically significant and showed the effective role of the causality of domestic investment and that of financial integration on the economic growth rate of Pakistan economy. The effect of political and economic stability captured through the dummy variable also shows an impressive role in the growth of Pakistan's economy. The study recommends that sturdy efforts are required of the government of Pakistan for target investment especially in the agriculture and manufacturing sector for a more fruitful outcome.