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Exploring the Impact of Macro Economic Variables on GDP Growth of Pakistan

Author Affiliations

  • 1Research Scholar, Army Public College of Management and Sciences (APCOMS), Rawalpindi, PAKISTAN
  • 2 Lecturer, Department of Business Administration, University of Sargodha, Sargodha, PAKISTAN
  • 3Research Scholar, Department of Banking and Finance, Government College University, Faisalabad, PAKISTAN
  • 4 Lecturer, Department of Banking and Finance, Government College (GC) University, Faisalabad, PAKISTAN

Res. J. Management Sci., Volume 3, Issue (9), Pages 1-6, September,6 (2014)

Abstract

The main purpose of the study is to investigate the impact of macroeconomic variables (interest rate, exchange rate, inflation and FDI) on GDP growth of Pakistan by using annual data over the period of 1980 to 2013. To achieve objective, correlation coefficient, regression analysis and Granger causality test are used. From the result of correlation coefficient, the inflation and interest rate have negative and significant association with GDP growth. The result of Granger causality test indicated that the interest rate and inflation have a unidirectional causality and exchange rate and FDI have also unidirectional causality. From the regression analysis result it indicates that inflation, interest rate, exchange rate and FDI demonstrate significant impact on GDP growth. The results of the study recommended that SBP should adopt strict monetary policy to reduce inflation which has a negative significant impact on GDP growth. Further, high rate of interest rate should be removed in order to attract FDI ultimately it does improve the Pakistan GDP growth.

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