Domestic Private Investment, and Export on Output Growth of Large-Scale Manufacturing Sector in Pakistan: An Application of Bound Tests to Cointegration Approach

Abstract

The goal of this analysis is to explore the impact of domestic private investment in large-scale manufacturing sector on the output growth of the large-scale manufacturing in Pakistan. The investigation utilized yearly data for the year 1973-2020. By applying the autoregressive distributed lag (ARDL) technique, the study examines both short-term and long-run effects of domestic private investment (DPI) on output growth in large-scale manufacturing.However,  the study affirms a positive and significant relationship among domestic private investment, exports and value-added, large-scale manufacturing (VAL) in both short-and long-run, while market size and inflation also have a negatively and significantly influence on the value-added, large-scale manufacturing sector. It is also confirmed that domestic private investment, export, inflation have a bidirectional causal relationships with large-scale manufacturing, value-added. Moreover, findings also implies that unidirectional causality is running between employment (EMP),  market size (MS), and large-scale manufacturing growth output growth (VAL). Hence, numerous incentives with tax cuts or subsidizations must be sponsored by the supervision of government in a direction to foster private investment. Provided that political stability, better infrastructure, and management in industrial manufacturing zones empowers to attract transnational exports by improving law and order conditions in Pakistan.

Keywords: Domestic private investment, value-added, large scale manufacturing, export, Pakistan.