Nexus between Foreign Direct Investment (FDI) and Economic Growth in Afghanistan: An Econometric Analysis

This study analyzes the relationship between Foreign Direct Investment (FDI) and economic growth in Afghanistan. The objective of this paper is to examine the impact of major economic variables i.e. FDI, inflation rate, exchange rate and interest rate on economic growth of Afghanistan. The time series secondary data is used ranging from 2005-2016. GDP is considered as dependent variable, whereas FDI, inflation rate, exchange rate and interest rate are considered as independent variable. For this study multiple regression analysis has been used and the result shows that all variables show positive impact on economic growth except FDI and inflation rate which show negative impact. The study suggests that there is need of stabilization in inflation rate and considering the Foreign Direct Investment (FDI) the source of economic growth, there is a need of economic policy bound for attracting FDI.