Interlinkages between Foreign Direct Investment, Energy Consumption, and Economic Growth: Empirical Evidence from Pakistan
DOI:
https://doi.org/10.22555/ijelcs.v9i2.1170Keywords:
FDI, Energy Consumption, GDP, ARDLAbstract
This study aims to analyze the short and long run relationship and causal association among foreign direct investment, energy consumptions and gross domestic product (a proxy of economic growth) and time series data is used from 2000 to 2020 which is obtained from World Development Indicators (WDI) and State Bank of Pakistan SBP. The unit root ADF test applied for stationary and one variable is stationary at level, one at first difference and one at second difference, ARDL & Wald Test were employed to see short and long run causal association among variables of interest. Further; for Model Specification, Histogram, Breusch-Pegan Test, Ramsey Reset Test, CUSUM & CUSUM Squares tests were applied. The trend analysis of energy production & usage have very considerable gap, despite of being a major receptor of FDI inflows in Pakistan. Further results confirm there is short and long run causal association among FDI and energy consumption with GDP of Pakistan. Keeping in view the current situation of Pakistan, the policy makers should formulate policies that consider minimum level of debt and discourage loan-based investments. Such efforts would be helpful to mitigate the energy sector problems and ultimately enhances economic growth of Pakistan
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