FDI and Domestic Credit: Which One is a Better Contributor Towards Industrial Value Added?

Abstract

Foreign Direct Investment (FDI) is an integral ingredient to foster the industrial progress in a recipient country. This study is initiated to explore the impact of FDI on the industrial growth of Pakistan. Moreover, the internal factors which are foresighted to affect industrial growth like domestic credit to private sector and access to electricity are also traced for their impacts on industrial growth. The time series analysis was carried out on the secondary data of the length 1980 to 2023. The Autoregressive Distributed Lag (ARDL) model is incorporated to find the regression estimates. The results confirm significant positive long run impacts of these variables on industrial growth of Pakistan. As a policy norm, the state government needs to facilitate FDI together with an extended base of credit to private sector in line with availability of electricity for a better industrial performance.