Macroeconomic Dynamics in Pakistan: The Role of Inflation, GFCF, and FDI in Economic Growth

Muhammad Zuhair Fazeel; Muhammad Fiaz; Muhammad Ashraf Farid  Khan

doi:10.69671/socialprism.2.1.2025.26

Authors

Muhammad Zuhair Fazeel Lecturer Department of Management Sciences, Qurtuba University of Science and Information Technology DIKHAN, Pakistan Author
Muhammad Fiaz Lecturer Department of Management Sciences, Qurtuba University of Science and Information Technology DIKHAN, Pakistan Author
Muhammad Ashraf Farid Khan Lecturer Department of Management Sciences, Qurtuba University of Science and Information Technology DIKHAN, Pakistan Author

DOI:

https://doi.org/10.69671/socialprism.2.1.2025.26

Keywords:

Inflation, Economic Growth, Gross Fixed Capital Formation (GFCF), Foreign Direct Investment (FDI), Pakistan Economy

Abstract

This study examines the nexus between inflation, Gross Fixed Capital Formation (GFCF), and Foreign Direct Investment (FDI) on economic growth in Pakistan, utilizing annual time-series data from 2010 to 2023. Employing descriptive statistics, correlation analysis, and Ordinary Least Squares (OLS) regression, the findings highlight a significant negative impact of inflation on GDP growth, whereas GFCF and FDI positively influence economic expansion. The results underscore the pivotal role of capital formation and foreign investments in fostering sustainable economic development, while emphasizing the detrimental effects of inflation on economic performance. Policy recommendations include targeted inflation control measures, enhanced investment in infrastructure, and strategies to attract FDI to achieve stable and inclusive growth. These findings contribute valuable insights to the understanding of macroeconomic dynamics in developing economies like Pakistan.