Major Growth Drivers for Economic Health Of Pakistan - An ARDL Approach

Marium Zehra; Asghar Ali; Khurram Iftikhar

Marium Zehra Lecturer, NED University of Engineering & Technology, Karachi
Asghar Ali Assistant Professor/Research Economist, Applied Economics Research Center, University of Karachi.
Khurram Iftikhar Assistant Professor/Research Economist, Applied Economics Research Center, University of Karachi.

Abstract

Growth drivers of any economy may include many factors including inflation rate, foreign direct investments, trade balances, trade deficits, GDP deflator etc. The factors of GDP growth rates are usually different in several economies. If we match up to the factors of growth of developed economies with that of developing economies, than the results will not be efficient or reliable because it takes into account same parameters for all. However, the yardstick criteria for assessing macro-economic growth are different in developing countries.

Pakistan GDP growth is hampered by high rates of inflation and interest rates. Stagnant growth does not represent in Pakistan’s economic health. Moreover, artificial growth is determined by inflationary pressures and monetary decisions. The need of time is to assess whether the said determinants are true determinants.

The aim of this research is to assess the major growth drivers for economic health of Pakistan. In this research, Interest rate and Inflation rate appeared as major growth drivers for economic health of any country. Whereas, we are tried to check the Short run and long run relationships of GDP Per Capita, Interest Rates, Inflation Rates, Foreign Direct Investment and Exchange Rates have been tested through Auto Regressive Distribution Lag (ARDL) Model. The Augmented Dickey Fuller test has also been used for checking stationarity of data. The results mentioned above depict existence of long term relationship among GGDP and other descriptive variables.

Keywords: Economic Growth, Political Stability, ARDL