Abstract:
Foreign direct investment (FDI) is often seen as an important catalyst for economic growth in the developing countries. Foreign direct investment is an important part of international economic structure. It effects the economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfer in the host countries. The main purpose of the study is to investigate the impact of FDI on economic growth in Pakistan, for the period 1990-2009. The relationship between FDI and economic growth has been analyzed by using the production function based on the endogenous growth theory; other variables that affect economic growth such as Trade, domestic capital, labor and human capital are also used. The expected results of the study are positive and statistically there is a significant relation between FDI and human capital, domestic investment and trade. Policy recommendations are suggested in the light of the results obtained, regarding the FDI in Pakistan.
