Financial determinants of economic growth of Pakistan: An empirical analysis Zaib-un-Nisa

The paper attempts to investigate the relationship between Savings and Economic growth of Pakistan by using the time series data from 1972 to 2011. Ordinary Least Square method is used for empirical analysis. The analysis is made in two parts. In the first part, descriptive statistics and correlation matrix are described. In secondpart, multivariate analysis explains how saving of Pakistan is determined byeconomic growth. The study concludes that the employed labour force, realgross fixed capital formation have positive and significant influence on real gross domestic product. Exchange rate and foreign direct investment have negative but significant impacton real gross domestic product. Real gross domestic savings has positive and insignificant impact on real gross domestic product. Keeping in view the role of savingsand economic growth in Pakistan, it is suggested that Government should provide enabling environment and fiscal incentives for enhancing the foreign direct investment. This will increase the gross domestic product in the country. For this purpose, the industrial and agricultural sectors of the country must be stable. Moreover, there is a need of creating an investment friendly business environment in Pakistan.