CHAPTER 5

CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion:

In our present study, we may conclude that inflation, domestic saving, domestic investment,
government expenditures and net exports affect the volume of economic growth (G.D.P) of
Pakistan. We show the graphical representation of our independent variables they show the
economic growth in Pakistan but Gov. Expenditure and high inflation like in (2009-2011) is
not good for economic growth. And after that we apply the some different econometrics test.
Firstly we apply the Unit Root test (ADF) on the data of our variables to check the stationarity.
And after that we apply Johnson co-integration for the long run results and apply Vector Error
correction Model for short run results of our model. After applying the Johnson co-integration
test on our model we conclude that government expenditure has a negative while inflation,
domestic savings, domestic investment and net exports has a positive impact on the Gross
Domestic Product (G.D.P) of Pakistan. According to Vector Error Correction Model (VECM)
results domestic investment, government expenditure, inflation, domestic savings and net
exports with respect to Gross Domestic Product will converge to equilibrium in the long run.
There is a decrease or increase in the G.D.P of Pakistan since 1980 to onwards.

Economic growth of Pakistan increases over a period of time but development does not
increases because of many reasons like corruption, inefficient government policies. Political
instability, terrorism etc.

Government of Pakistan should make and imply those policies which not only increase the
gross domestic product of Pakistan but also helpful in the economic development and growth
of Pakistan. Government must should introduce good and efficient policies for the stabilizing
economic growth. Government should increase productive expenditures like national
investment, promote industrial sector and reduce nonproductive expenditures like expenses on
defense etc.
5.2 Recommendations:

In developing countries like Pakistan saving ratio is too much low because of low earnings and
low per capita income so thats why peoples of Pakistan just fulfilled the basic needs and do
nothing save. Government of Pakistan must encourage the people to save more by increases
the interest rate in the country and introduced different saving polices with more effective
manners. Government should decrease the taxes and duties on people so exports of our country
increases through investment channel. When saving increases then people demand less goods
and services so inflation in the country automatically controlled because inflation comes from
demand side in the market. Government expenditures by government should be on productive
projects like transportation and communication, industrial and agriculture sectors etc. rather
than on nonproductive projects like subsidies on electricity, food and oil etc.

The study finds a number of key policy implications for the economic growth of Pakistan,
which are as follows:

The interest rate of banks should increase in order to encourage people to save but not too
high.
Government of Pakistan should make efficient and effective monetary and fiscal policies
for the control of inflation rate in Pakistan.
Government of Pakistan must be avoid the double digit inflation.
Government of country should decrease the non-productive expenditures like expenses on
military and subsidies etc.
Government should increase productive expenditures like investment in transportation and
communication sectors.
Domestic Investment should be promoted and increases through different policies in order
to increase G.D.P of Pakistan.
By increasing investment in Pakistan there are more employment opportunities increases
in Pakistan so G.D.P of Pakistan also increases.
Government should promote industrial and agriculture sectors to produce more by this way
production of country increases so country would be able to export surplus goods to other
countries of World.
And increased the export quota for exporter. By exports country earn foreign exchange and
G.D.P of Pakistan increases in this way.
 Government of Pakistan must promoted the policies of economist of Pakistan like in 60s
chief economist is independent from government and they make polices thats the main
reason of high economic growth in 60s.