Impact of Foreign direct investment on Economic Growth

Introduction
This study is introduction for solving the problem that political and economic stability policy
for era of dictatorship. In our country poor law and order situation prevailing the economy than
FDI decline. FDI rapidly decline and reach at level of 820.9 million in 2012.In our study the
main reason of FDI decline is that attribute to war against terrorism, political instability etc as
a result global financial slowdown.

The problem is that we do not utilize the resources efficiently. But FDI provide more resources
to under developed countries like capital, technology etc. than poverty reduces and
unemployment reduces. In the earlier banking, agriculture sector that is not provide the govt.
In 2011-2012 level of FDI down due to global financial crises and flood situation etc.
Therefore, poor law and order situation FDI decrease and reach at 4%only.

The problem is that investment is not enough for economic stability. Therefore, we require
more investment for the increasing economic growth than macroeconomic stability occur.
Through no debt inflow than balance of payment reduces. In which study GDP is used that it
creates a miss-specific problem. In our economy macro level problem increase as compare to
micro level problem like training of man power etc.

The problem is that unlike additional capital; foreign private investment is bad effect on the
economy. The main problem is that paper investigates are: What are relationship between FDI
and economic growth. Foreign private investment will definitely increase economic growth.
One basic issue on FDI into under developed countries, it is effect on the different section of
the economy.

The problem is that Pal dam find evidence to tell that aid has no effect on growth. Aid does not
have indirect effect that reduce investment and saving rate. Aid effectiveness is influenced by
political condition. The aid that positive impact on capital and economic growth. Every year
came into our country than aid will be spend on the flood problems. In many countries is not
fiscal policy work.

The problem is that we use the traditional technology than more cost bear on production. The
technology improvement provides a vital role to long term economic growth increase and
income. We use child labor in industries than use inefficient resources than production reduce
rapidly.

Literature Review

Sundas Rauf & Nayyra Zeb, December 23, 2013.The purpose of the study is that how FDI
positively impact on the under developed countries. In 1972-2012 promote the production
through FDI.I am used the least square method and another variable like terrorist etc. used in
study. The finding is that through FDI increase the economic growth of Pakistan.

Akbar Ahsan & Akbar Minhas, 2015.The purpose of the is that how we increase the FDI inflow
in Pakistan period 2000-2013. In 2009-2013 FDI speedily decline. Therefore, due to not god
law and order situation create Political and economic instability. I am used the Multi regression
analysis to elaborate the fluxions in FDI in Pakistan. I am used different variables like GDP
and appropriate openness for significant result. The finding is that FDI inflow play good rule
for policy maker in the Pakistan.

Dr. Muhammad Azam in 2002. The purpose of the study is that when we take comparison
between Central Asia & Pakistan particular than FDI good impact on the economic growth. I
am used Secondary data. Therefore, telecom and education positive impact on economic
growth. The finding is that when we use above indicator than reduce the political instability
and terrorism.

Ales H. Mwakalasyain in 2017. The purpose of the study is that hoe FDI impact the Agriculture
sector in Tanzania. When we FDI in Agriculture sector than GDP promote and GDP inflow
increase. I am used a Breach-Godfrey serial correlation LM test. The finding is shows that GDP
growth rate inflow GDP growth ratio positively correlated. Through FDI promote the labor
force and employment and reduce the poverty in agriculture sector.

Mahmood Shah & Irfan Ulla in June2014. The purpose of the study is that i am improving the
significant relationship between the economy investment FDI and economic growth in
Pakistan. I am used the Phillips and Peron test. I am used the Toda Yamamoto Causality
approach for study. The result is that FDI and domestic investment create a long run
relationship in economic growth.

Steve Loris –Gui Diby.In Africa I am see the effect of foreign direct investment on economic
growth. In 1980 to 2009 I am used the panel data of 50 Africa countries.
For estimators I am used the method of moment (SYS-GMM) in 1998.It output that FDI
inflows had a significant effect on economic growth during the interest period. When we use
low level of human resources than no limit effect FDI. In 1980 to 1994 negative effect on FDI
and positive effect on 1995 to 2009.Shiva S, & Makki. In undeveloped countries FDI and trade
play major role to promote the economic growth. I am use cross sectional data.

In developed countries and undeveloped countries technology transfer play an important role
to protect economic growth? In host countries FDI also increase investment and human capital.
The main components of economic growth are international trade. Saibu Qlufemi & Keke
Ndidi. I see that how the foreign private investment effects on economic growth. I am use
annual time series data. I am analyzing the interrelation between foreign private investment
and economic growth through use of error correction mechanism technique.

The economic growth increase from 78% to 116%. The result also that 22% only capital inflow
is invested in Nigerian economy. And I find that political environment unfavorable for foreign
private investment. Naveed Iqbal Chaudhary. The important of the study is that to find out
close relationship between FDI and economic growth. Its represent the relationship between
long and short run in China. In duration 1995-2009 use the secondary data. I am use Dickey –
Fuller unit root test to estimate the (ARDL) approach. I am use error correction model applied
that give information about variable those use in model. The funding is that see close
relationship between FDI and economic growth. Prove that null hypothesis that no correlation
among variables at bottom line.FDI has positive effect on economic growth.

Edna Maeyen Solomon Fecha.The purpose of the study that how the FDI and economic growth
equal effect from the human capital, political economic development etc. I am use multiple
variables those effect the economic growth in the host country. In duration 1981 to 2005 use
the GMM estimate to a panel of 111countries.The funding of this study that positive effect on
economic growth and FDI through political environment and human capital.

De Groote & Olaf, (2014). The purpose of the study that how foreign direct investment effect
the welfare. I am using panel data and Genelized method of moment’s estimations. I am using
different variables like household consumption and FDI. The funding is that through inequality
increase the FDI and welfare but household consumption and HDI not positive effect on the
welfare and FDI.
Dhakal & Dharmendra (2007). The purpose of the study that FDI has positive effect on the
economic growth. Relationship between two variables use direct test. Granger Causality test
used in the Southeast and South. The funding of this study that in across countries the
substantial variation in the FDI growth. And FDI increase through used of regression technique
and use more limited rule of law and revenue.

Serhiy Phsarenko, (2004). The purpose of the study is that in post Come-on transition economy
countries FDI positive effect on economic growth. I am used theory model to see the impact of
FDI on economic growth. I am used many another polices to see the effect of FDI on economic
growth. The funding of this study is that in host countries positive effect of FDI on economic
growth. Technology transfer and capital both positive impact of FDI on economic growth.

Uneora Chinweobo Emmanuel. The purpose of the study is that in developing countries
provide capital for economic growth. I am used many variables like inflation and exchange
rate. And used OLS method to see the correlation between exogenous and endogenous
variables. The funding of this study that 46.5%economy growth increase inflation and
exchange rate.

E.M Ekanayake & Desha Chant, (2014). In underdeveloped countries the economic growth is
promote through aid. In 1980-2007 Asia, Africa and other 85 under developed countries uses
growth and aid is used for poverty reduction. Hezron, M.O Sana & Praline (2016).In 2001-
2004 Nairobi focusing on the energy sector through role of foreign direct investment on
technology transfer and economic growth in Kenya. Nominal data is collect for the use of
questionnaires. Trade facilitation, Technology diffusion and technology transfer represent the
relationship between the variables through established the study. I found that if the investment
done in the energy sector will led to new technology in the economy. Industry can be effective
to local investor with sharing knowledge in variation in the production and development.

Rozile Asid & Dullab Mulok (2014).In 1970- 2011 explain the strong interlinked between
exchange rate and foreign direct investment those impact on economic on economic growth.
To present the long time period relationship mid the variables, so I am used ARD methodology.
I give the positive and significant result in the long run equation through effect of foreign direct
investment, but real exchange rate is not effect in long run equation. I used annually data for
exchange rate. I found that significant and less ratio effect on the exchange rate and foreign
direct investment in the short run.
Data and Methodology

My selected study is impact of FDI on economic growth. I am used dependent variable is

economic growth. Therefore, the proxy of this variable is GDP.I am used some proxy variable
against independent variable like degree of openness, exchange rate, foreign debts, CPI,
domestic capital formation and Regine. This study is used by Mohopatra 2014, Jawed, Amen
& Arshad 2013 and Rahman et al 2009.In which FDI is major variable but another variable is
also called control variables. The very first research conduct by M Gillis & DH Perkins in
(1992). The current year of the study is 2015 (Akbar Ahsan & Akbar Minh’s)I am used
Augments Dickey Fuller test and N G Peron test.

Model:

y      1 FDI   2 CPI   3 GCF  

Here:

GDP=Gross Domestic Production

FDI=Foreign direct investment

DCF=Domestic capital formation

CPI=Consumer price index

References

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