Impact of Macroeconomic Indicators on Economic Growth of Pakistan: A Time Series Data Analysis

Abstract

This research investigates the intricate relationship between macroeconomic indicators and economic growth in Pakistan from 1985 to 2022. Using time series data analysis, the study examines how key variables like inflation, exchange rates, foreign direct investment (FDI), government spending, trade, and population growth impact Pakistan’s GDP. The findings reveal that FDI and trade openness significantly boost economic growth, emphasizing the importance of investment and international trade. Conversely, high inflation and adverse exchange rates hinder GDP growth, indicating the negative effects of macroeconomic instability. The study also underscores the critical roles of government expenditure and human capital in sustaining long-term growth. The research provides valuable insights for policymakers on promoting a stable macroeconomic environment, attracting foreign investments, and enhancing trade openness to achieve sustainable economic development. This study contributes to the literature on economic growth in emerging markets and offers a reference for similar analyses in other developing economies.