THE INTEGRATED IMPACT OF FINANCIAL DEVELOPMENT AND FOREIGN DIRECT INVESTMENT ON THE ECONOMIC GROWTH OF SAARC MEMBER COUNTRIES: AN ECONOMETRIC APPROACH

Abstract

This study investigates the combined effect of Financial Development (FD) and Foreign Direct Investment (FDI) on the Economic Growth (EG) of SAARC nations. For the analyses, panel data from 1995 to 2023 is used which was collected from World Development Indicators. For data analysis, panel unit root tests, cointegration tests, panel Autoregressive Distributed Lag (ARDL) model and Granger causality tests were applied. Findings show a significant positive relationship of EG and FD and FDI. But in case of short run, negative and insignificant relationship is found. It implies that FDI and FD are imperative to improve the EG of SAARC countries in the long run. Therefore, the study suggests that FDI inflows and financial sector development on long term bases should be encouraged to improve the economic growth of SAARC countries.