Analysis of Investment Scenario in Pakistan: Time Series Evidence

I nvestment refers to the net addition to capital stock which is used for future production.It is a crucial ingredient of the national income identity.Investment augments physical, financial as well as human capital, each of them has its role in the production of an economy.Health and training facilities are most likely to increase the productivity and efficiency of the labor force.Investment in machinery, inventories, buildings, land, and computers, will make considerable accumulation to the productivity.Financial investment generates profits in various shapes including earning of interest on dividend, bonds and protections, value, and reinvestment of benefit to upgrade both profitability and benefit.According to Afzal (2004a) reserves and investment are primary large-scale variables which are observed surely striking for attaining speedy financial development, for the major economic purpose of any development plan in an emerging nation.For the country, it is hard to locate, which had the option to develop a high rate for a significant stretch without encountering high paces of capital arrangement or potentially high paces of investment funds.Afzal (2010) reported that developing and developed countries reveal encouraging investment savings association and in both time series and cross-sectional research.Accordingly, the fundamental job of speculation for actual output yield development is of top mystery since speculation both in microeconomic and mac-Abstract | This paper made an attempt of econometric analysis of the investment situation in Pakistan for the period 1990-2017.The variables including domestic credit, national savings, lagged investment (IV), imports, and the real exchange rate were found to be the major factors affecting investment in Pakistan.Among all, the savings coefficient is positive and insignificant because of savings in Pakistan had no healthy pattern.Exchange rate has adversely affected the investment because of unidirectional causality.Specification and analytical tests supported reliability of the investment does not affect investment model from key econometric issues.The stability test shows that investment fluctuated during the 1990-2017 periods.OLS and GMM results are comparable.OLS estimation results are reliable since these variables do not suffer from Endogeneity problem.