CROSS-BORDER FINANCE AND ECONOMIC GROWTH: A THREE-DIMENSIONAL PERSPECTIVE

Abstract

The central aim of this research is to test empirically the importance of remittances, FDI and foreign aid on economic growth estimated by GDP in the context of Pakistan. Notably, while employing twenty years historical secondary data made up of tertiary data for the period 2005 to 2025, the study uses robust econometric methods to guarantee meaningfulness of results. The presence of serial correlation in the data was checked using the Durbin-Watson test, and no serial correlation was found, indicating the robustness of the regression estimates. In addition, the coefficient of determination (R²) was applied to evaluate the predictive performance of the model, and it proved to have a high explanatory power which means that the chosen independent variables strongly explain the changes in the GDP growth. Also, the research used OLS as a technique to investigate the strength and nature of the relationship among the independent variables. The findings reveal that remittances, FDI and foreign aid are beneficial and significant for stimulating the economic growth of Pakistan in the form of important sources of capital inflow, employment, technology and poverty alleviation. The research further confirms that remittances, foreign direct investment and foreign aid are essential determinant of Pakistan economic activities that can be well managed with sound policy measures to their maximum potential for development.