Economic Determinants of Domestic Investment: A Case of Pakistan

Abstract

The study intends to investigate the determinants of gross domestic investments in Pakistan from the period of 1973 to 2010. All the annual time series of data have been extracted from the valid sources like; Business Recorder and State Bank of Pakistan. In order to assess their behavior over the time, and to evaluate how these variables have either hindered or encouraged the growth of investment in Pakistan's economy. Domestic investment in Pakistan is stimulated by real GDP growth as well as with the expansion of exports of goods and services. Moreover, the flow of FDI in Pakistan is "crowd in" domestic investment. The development of financial sector and human capital is vital for economic escalation in country. However, the stimulation in formal credit and formation of industrial capital may lead towards promulgation in domestic investments. The Pakistan's economic environment demands massive level of domestic investments which lead towards capital formation and economic progression.