Suchergebnisse

The various form of inflow of foreign capital (loans, FDI, grant and portfolio) was welcome in developing countries to bridge the gap between domestic saving and domestic investment and therefore, to accelerate growth [Chenery and Strout (1966)]. Some other have been challenged the traditional view that foreign aid impedes domestic savings growth and mobilisation and have economic growth.1 Much attention have been paid in past 30 years, relationship between foreign capital flows and domestic saving, the main purpose of these studies have been determined whether in less developed countries foreign capital inflow and domestic saving are complementary or substitute. However, there is a controversy at theoretical and empirical levels, over the effects of foreign capital on both economic growth and national saving. A number of studies in Pakistan have been conducted during the early 1990s to examine the relationship between saving and foreign capital inflow.2 All studies shows the inverse relationship between foreign capital inflows3 (aggregate level) and saving rate, but the impact of FCI at disaggregate levels (loans, grants, FDI) on saving rate show different magnitude and signs, similarly impact of FCI on decomposition of saving rate (Public, private, household, corporate) also have different magnitude and sign.

Economic development and population growth in the poor areas of the earth is a subject of an essential concern for the environmental economists. Developing countries are facing and suffering by the serious problem of high population growth which is causing environmental degradation. A rapidly growing population exerts pressure on agricultural land and raises demand for food and shelter which encourages the conversion of forest land for agricultural and residential uses, now we know that growing population is a major cause of air, water, and solid waste pollution. The world population was 2.52 billion in the year 1950, which increased to 6.06 billion in 2000 and is likely to reach 8.3 billion by the year 2030. While the population size will remain almost stationary in the economically developed part of the world, around 1.2 billion, during the same period population is likely to grow in the less developed regions. This is likely to pose challenges for the economic growth and pressure on environmental resources in the developing countries. Furthermore, most of the population growth in the developing countries is likely to be concentrated in the urban areas. This has implication for increased demand for energy and water resources in the urban areas. This will also pose challenges for the management of increased solid waste, air and water pollution. One of the striking experiences of the developing

Foreign Direct Investment (FDI) as a growth-enhancing component has received great attention of developed countries in general and less developed countries in particular in recent decades. It has been a matter of great concern for many economists that how FDI affects economic growth of the host country. In a closed economy, with no access to foreign saving, investment is financed solely from domestic savings. However, in open economy investment is financed both through domestic savings and foreign capital flows, including FDI. The investments in form of FDI enable investment-receiving (host) countries to achieve investment levels beyond their capacity to save.

In the global economy, the performance of any country will greatly depend on the performance of its exports. The trade performance determines the prospects of change. It helps countries win friends, and break the traditional mould of isolation and indifference. The performance of exports of countries depends on various price and non-price factors. In international trade transactions it is important to recognise that these transactions require some amount of time that occurs between the decision to buy and actual delivery of the product from foreign country. In the Econometric modelling lag occupies a central role. It is recognised that due to psychological, technical and institutional reasons, a dependent variable may respond to explanatory variables with lapse of time, in particular when dealing with time-series trade models.

The impact of the policy reform on economic performance has been one of the stifling issues in development economics in the recent years. Since the middle 1970s, there has been considerable progress in the trade reform in the most developing countries, turning from an import substitution strategy to export-oriented approach. Pakistan also follows export-oriented policies. Pakistan's trade pattern and trade policy have been moving towards fewer and fewer controls, tariffs rates have come tumbling down. Export-led-growth hypothesis (ELG) suggests that due to positive correlation between export and growth, therefore, export-oriented policies contribute to economic growth. Thus, international trade and development theory suggests that export growth contributes positively to economic growth. On the basis of this framework, most empirical work on the effects of export promoting strategy followed in developing countries evaluated openness with trade. Empirical research about the effect of this liberalisation process has treated export as principal channel for growth. The relationship with exports and growth, grounded in endogenous growth theory, has been tested for Pakistan [Khan (1995); Ahmad, Butt, and Alam (2000) and Akbar (2000)].

The present study investigates the relationship between domestic savings and foreign capital inflows in Pakistan using cointegration and error-correction modelling of handling the non-stationary time series data. Applying three different cointegration techniques, the findings in this paper indicate that there is a valid long-run inverse relationship between domestic savings and foreign capital inflows. The Unrestricted Error Correction Model found short-run significance inverse relationship between domestic savings and foreign inflows but Short-Run Dynamic Engle-Granger procedure found insignificant inverse relationship between these two variables. The empirical results support the "Substitution thesis" hypothesis. (Pak Development Rev/DÜI)