An Estimation of Harrad-Dommer Model on the Pakistan Economy A Case Study from 1980 to 2019

Considering its importance, this study tests the empirical nexus between investment and saving over the period in the Pakistan economy. By using the H-D Model methodology, we have estimated the link between national saving and national investment in the Pakistan economy over the time 1980 to 2019. Various cross-country studies in the literature are evidence of a positive relationship between saving and investment. The econometric method “Ordinary Least Square (OLS)”, has been used to estimate the model. It concludes that national and foreign savings are proportionally related to investment in the Pakistani economy. From the estimates, it is also recommended that both national variables have a perfect relation in the economy. In the Pakistan economy, more savings would be needed for significant improvement in the investment. The government of Pakistan should pay more attention to enhancing encouragement through policy for not only investment but also saving rate for sustaining investment in the country because the savings rate has been the main obstacle to capital availability for economic growth and development. Moreover, to enhance investment trends in the Pakistan economy, more and more savings would be needed with mega reforms harmoniousness like China Pakistan Economic Corridor (CPEC) and Special Investment Facilitation Council (SIFC).