EXTERNAL DEBT, FOREIGN AID AND ECONOMIC GROWTH: A TIME SERIES ANALYSIS OF PAKISTAN

Author(s) : Nasir Munir and Zakia Batool

Abstract:

The paper examined the relationship between External debt and Foreign aid in the Economic Growth of Pakistan. We have used the data of all variables from 1980-2019.GDP has been used as a proxy variable in this study. The explanatory variables are a foreign direct investment, external debt, and foreign aid. Since we have time series data, the augmented Dickey-Fuller Unit Root test is used to ascertain stationarity. Some variables are stationary at a level, and some are stationary at the first difference, so we applied ARDL and found that foreign aid and foreign direct investment are positively related to growth. At the same time, external debt has shown a negative impact on the economic development of Pakistan.