Impact Of Government Investment(Development Expenditures)and Chinese Investment On Economic Growth(GDP) Of Pakistan

Given the evidence in the literature,foreign direct investment and government fiscal policies along with development expenditure pertaining to have an influence on the economic development of the country.Here Pakistan is taken as a case study to examine the idea behind it.The core focus of the research is to evaluate the impact of government development expenditure and Chinese foreign direct investment on the economic growth of Pakistan.The research has also observed the relationship between Chinese foreign direct investment and government development expenditures on economic growth.This research has studied the impact of this sort from the period of 1980 to 2020.The data sample of the said study was taken from the secondary resource from the World Bank database and the Pakistan Board of Investment Publications.The dependent variable in this study is GDP growth and independent variables are Chinese foreign direct investment,CFDI government development expenditure,GDE and the relationship between two CFDI*GDE to regress upon the economic growth of this country.For the empirical analysis of this study,there were several tests implemented on the collected data including the Unit root test,Autoregressive Distributed Lag(ARDL),Error Correction Model(ECM),White test,lag selection criterion,Akaike Information Criterion(AIC)and Granger Causality Test.For empirical analysis,Eviews and IBM SPSS Statistics were used.It was found that Chinese investment and GDE have a positive impact on Pakistan’s economic growth in the short run whereas,are found to affect negatively in the long run.The positive relationship between CFDI government development expenditure is present in both the short and long run as some of the government fiscal policies are in favor of Chinese investment and aim to increase the investment inflow.In this way,GDE stimulates CFDI yielding a positive impact on GDP growth.The study was then further divided into two sub-period groups to analyze the relationship before the sharp incline of CFDI and after its sharp decline in pre and post-2007 sub-periods.In pre-2007 sun-period CFDI and GDE helped in economic growth with a negative relationship between CFDI and GDE.After 2007 dramatic decline changed the relationship between variables as GDE has a positive while CFDI has negatively affected economic growth with a negative relationship in CFDI*GDE.These results are very useful for policymakers and the government to formulate effective economic policies for the economic development of Pakistan and are insightful for foreign investors to understand the trend.