Master of Science in Economics

Faculty / School

Faculty of Business Administration (FBA)


Department of Economics

Date of Submission



Dr. Qazi Masood Ahmed, Institute of Business Administration, Karachi

Project Type

MSECO Research Project

Access Type

Restricted Access


This study aims to diagnose the role of macroeconomic policies in either enhancing or inhibiting, private investment in Pakistan. The study assesses impact of fiscal and monetary policies, as measured by government’s developmental expenditures and the interest rates respectively. This task is performed by using econometric methodologies such as 2SLS, GMM, and LIML, besides OLS, to ensure robustness of results and to cater to the issue of endogeneity, which is not addressed by the latter. It is estimated that an increase of 10 percent in real developmental spending increases real private investment by 0.95-1.5 percent and 0.15-0.25 percent, in the short-run and long-run respectively. On the other hand, a hike of 100 bps in interest rates results in decreasing real private investment by 0.3-0.5 percent and 0.5-0.8 in the short and long terms, respectively. An increase in price of capital goods dampens real private investment, whereas an appreciation in the real effective exchange rate augments it. Lastly, financial liberalization in Pakistan seems to have helped real private investment.


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