Research Wok . Taha

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for Economics Thesis. Macro Economic Determinants of Economic growth in case of Pakistan

Text of Research Wok . Taha



ISLAMABADAugust, 2015

Chapter 1Introduction1.1 Introduction:The total price of commodities produced and services provide in a state in the period of one year is and within the boundaries known as economic growth and development .Each country in this world want and its one of the main priority and purpose to achieved the economic growth. Each country want to know as a developed country in the world. Every developing country have a mission to able to control poverty, to increased his standard of living, strengthening and strong their political and social institutions of a country and then achieve good stability in his country. We were know very well that without good and stable GDP of any country cannot be said to be good developed country in our world. Economic growth and development is the flow of capital market. The persistence of the economy of economic growth in each country. It can be the determining opportunities to give, in which private consumption, the budget deficit and external debt. But in this project our aim and objective is to examine the growth of economy with the help of domestic investment, government spending, domestic savings, inflation, and domestic exports. My work aims, factors that influence to determine positive or negative economic growth. And my motivation is to examine how economic growth of Pakistan is goes up. In the 1980s the growth of Pakistan has come good due to good government polices so outcomes is good for economic growth of Pakistan and even development. On this moment, Pakistan is facing a lots of difficulties and problems. Pakistan per capita income is very low at 1990 and 1995 for several reasons. As per the report of World Bank, there is seven countries in which low-income and its decreasing with passage of time Pakistan is one of them countries. For the government faces operating costs and taxes was very poor. Low Gov. Expenditures, consumption and taxes is the best thing for economic growth. They have all show the result in the country, whether its positive or negative. If the Gov. of Pakistan done that then increases to balance economic wealth and growth of economy in our country, but Pakistan fast moving economic policies was weak or unstable from 1995 to 2000. In time of 2000 to 2006 Gov. of Pakistan make the economic policies in some diverse sectors and industrial and agriculture sectors of economy like as cotton ginning, both cotton and rice, Health policy, cotton ginning and flour mills for the purpose of good economic growth and development policies. In that time our Pakistani currency is value against dollar$ numerous and better policies also valued in that period. And at that time main reason is political stability because of new marshal law government by Perviz Musharaf and that time the FDI is very high in especially in telecommunication sector and industrial and also due to afghan war we also enjoy the foreign aid like in Zia era. So thats is the main reason behind stability of Pakistani rupee and stable USD $.From the time period of 2007 to 2010 the state of Pakistan economy faces most horrible and pathetic situation because of many reasons like political instability, terrorism, inflation, world economy collapse and also the major reason is corruption in government then at that time gov. do not took the any step for good and better judgment of capita, industrialized, Banking sector and goods plants and factories. Hard to introduce power crisis and its one of the main problems of the Pakistani economy. Because of these difficulties, which are pending at this time many industries in Pakistan and Pakistan's economic expansion begins to plummet. So the government does not provide an agreement in this economy so back .The main cause behind this high taxes, energy and power crises, political instability and also on that time we have no production for international trade so the clothes and textile units and production houses are being stopped. As David Romer says in (1986) and Lucas (1988) money gain and growing cause an increasing growth rates. According to Fischer in 1993 that economic growth and inflation have a negative relationship and a positive result for stable returns to scale, that is why we need a good human capital, venture to arrive the (R & D) and technological developments R & D.According to report of UN in south Asian countries there 1.4% poor inhabitants lives. There are four components be careful when forming rate of increase in labor productivity, capital person, skill and physical capital and two are close in view of the income referred to occasionally as GDP (I) period is given by the sum of total return expected for workers, including gross and companies not included and taxes less subsidies. The output method is the most common movement to and is determined by adding full utilization, investment, government and net exports. The country's development have an ability to organize and overcome the poverty, and better standard of living, and must be make it harder for their support and social organization and stability. The backbone of the economy is the growth of economy. It can be crucial across different types and private spending, budget shortages, foreign money. But to pursue this matter in the main center is economic growth through expense management, savings, price increases and foreign direct investment in the 1980s, public spending has been physically powerful for the growth of economy of country.From the period of 1991-2000 the stability in politics was terrible. In last of 1990'2 Decade United Nations impose sanctions on our country; because of main reason is export is fell slowly. Administrative expenses will rise during this decade. Normally, the cost of litigation is used to make a decision region war zone. From 1988, the economic management of Pakistan were fully depend on SAP (Structural Adjustment Programmed) .There is civilizing the bop, reducing budget deficits, reduced to improve economic growth and rising prices. Improving the balance of payments from one side to the local currency depression, cutting the business lacks side; Trade liberalization and the fall of management size. Financial growth is in the direction of the constant return of scale, therefore, be necessary capital more funds in ID (research and development) to improve and technological developments. As Fager berg says (1987), modernity and economic rise has strong relationships. In 1980 it has wealth in administrative expenses subject to a well-constructed growth. In the time period of 90 to 95, the per capita income is low in Pakistan.In the start of Zia-Ul-Haq era there is motion of higher rate. After the first half ahead growth rate is at the level of 12.8%. We know very well GDP is really good in Zia era, so our gross investment increased steadily. GDP is good at that time because denationalized the industrial sector and high investment and even political stability. Next Zia introduced depression in money for the purpose of to promote exports of a country. Our balance of payments has been fully resolved by Zia, because our products have managed to find a way to adapt their products to promote their positions. Net wages of Pakistan in that time is symbolically a good example of the current government. If, however, the rise in gross assets once again on the increase in private consumption of goods and services enormously. Early in the decade Zia administrative costs were low, but due to the armed conflict in Afghanistan increased spending, the result of economic growth of our country. In short, it was Zia was good and form larger role in stabilizing the economy. Even we sacrifices something for afghan war but we also enjoy the good economic growth. There was also damage such as deficit reduction in commodity prices and oil prices, the global economic crisis and the debt crisis and increasing debt. 1.2 Objectives: To check the relationship between different determinants of economic growth like government expenditure, net exports, domestic savings and domestic investment To check the effect of inflation on growth of economy of Pakistan. To check and examine the effect of government expenditure for the purpose of economic growth.1.3 Research Question: .How dose domestic saving, domestic investment, net exports, government expenditure and inflation impact on GDP growth in the period of both short and long run of Pakistan?1.4 Research Hypothesis:H0: There is insignificant effect of Government expenditure on economic growth of Pakistan.H: There is significant effect of Government expenditure on economic growth of Pakistan.H0: There is insignificant effect of Net Exports on economic growth of Pakistan.H: There is significant effect of Net Exports on economic growth of Pakistan.H0: There is insignificant effect of Domestic Savings on economic growth of Pakistan.H: There is significant effect of Domestic Savings on economic growth of Pakistan.H0: There is insignificant effect of Inflation on economic growth of Pakistan.H: There is significant effect of Inflation on economic growth of Pakistan.H0: There is insignificant effect of Domestic Investment on economic growth of Pakistan.H: There is significant effect of Domestic Investment on economic growth of Pakistan.1.5 Plan of Study:In our research and study there is 5 different chapters. The 1st chapter shows the Introduction, objective of the project, questions which related to our study, Research hypothesis and plan of our research. Then in 2nd chapter we show and tell the literature review of our research. Then in 3rd Chapter we discussed the data, methodology, and model specification, explanation of variables with graphical review of variables and data description. The in chapter 4th we explain and show the estimations and results on the behalf of diff