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This research has been conducted to investigate foreign direct investment and its impact on macroeconomic performance in Pakistan. This paper analyzes whether foreign direct investment and its indicators have significantly affected Pakistan's economic performance. In this research, economic performance is measured in the form of an index. While foreign direct investment with its indicators gross fixed capital formation, remittances, reserves, money supply and credit to private sectors by the bank is analyzing the economic performance. We conducted various econometric models: Bound test, Autoregressive distributed lag (ARDL) model and Error Correction model. In the empirical section, the findings of the bound test have proved the existence of long run ARDL. The empirical analysis of long run ARDL has proved the positive and significant influence of foreign direct investment, gross fixed capital formation, remittances and reserves on economic performance in Pakistan. While money supply and credit have no direction to affect the economic performance in Pakistan. In the end, the error correction model evidenced the significant impact of foreign direct investment and its indicators on Pakistan's economic performance in the short run. Moreover, the findings of the error correction model have stabled the error from short run to long run. The overall findings of empirical analysis evidenced the positive and significant impact of foreign direct investment on economic performance in Pakistan.
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