Evaluating the Impact of Capital Budgeting Parameters on Economic Prosperity in Pakistan: A Time Series Analysis Using the ARDL Model

Abstract

This study analyses the role of capital budgeting on economic growth in Pakistan while taking into consideration the current economic indicators apart from inflation rates, including interest rates along with foreign direct investment and exchange rates. The study will analyze 43 years of data, covering the period from 1980 to 2022, investigating vital relationships among the economic variables applying ARDL modeling for the short and long term. In the case of ADF, a stationarity state test was needed in order to increase the reliability of the outcome; hence, tests conducted on ARDL Bound confirmed that meaningful relationship existing between all these variables studied over the long-run. Its finding enhances our knowledge of capital budgeting with respect to its relevance with economic growth for Pakistan, offering very relevant implications for all policymaking strategies to investors and to all other academic research groups working towards development in all the economic sector segments.