The Impact of FDI on Economic Growth under Foreign Trade Regimes: A Case Study of Pakistan

Abstract

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.