Impact of Inflation and FDI on Economic Growth: A Time Series: Analysis of Pakistan

Abstract

The objective of this research paper is to check the impact of inflation, exchange rate and FDI and economic development researcher used time series data from 1973 to 2020 for my project, which researcher gathered from the sources World development indicator and State Bank of Pakistan. For inflation researcher used the proxy of Consumer Price Index (CPI), and other variables remain the same. The study paper's goal is to provide answers to the following questions: What percentage of inflation is beneficial to an economy? The three factors in the study paper's subject have a favorable long-term association with the findings. This indicates that when inflation is below the 2.80 percent barrier, which is the point at which it hinders growth, the Pakistani economy expands at its fastest rate. The marginal effect of FDI on growth is found to be positive when inflation is below the threshold, but it is found to be negative when inflation is over the threshold. In conclusion, the Pakistani government must harness, develop, and stabilize the nation's macroeconomic system while ensuring that inflation stays below the threshold in order to prevent alienating foreign investors.

Investigating the Inflation-Economic Growth Nexus in Pakistan from 1990 to 2020

“…Inflation had an adverse effect on economic growth, while inflation and real GDP per capita had an opposite trend. Mehak and Waqas (2023), checked the impact of inflation, exchange rate, FDI, and growth rate. The study used time series data from 1973 to 220, sourced from World Development Indicators and SBP.…”

“…Drawing inspiration from a rich tapestry of scholarly endeavors, the study embarks on a journey through diverse lenses, each contributing a unique and strong facet to our understanding. Mehak and Waqas, (2023) set a course, unfurling a narrative where inflation, exchange rates, and foreign direct investment play very important roles, unveiling a delicate dance that shapes the nation's growth trajectory. Iqbal, Nadeem, and Akbar (2022) brought to light determinants of inflation, unraveling threads that weave it into the fabric of economic growth.…”