Abstract
The nexus between investment and interest rate is always considered essential to analyze
the economic activity as these variables are important economic indicators in defining
macroeconomic activity. However, the unchanged condition of investment in Pakistan
has raised the cost of investment and crates uncertainty in investors. The paper
investigates the link between rate of interest and investment to incorporate a new
dimension of call money rate that may enhance the investment opportunities in Pakistan,
employing time series analysis for the time span of 1973 - 2015. The ARDL Bound
Testing Approach and ECM are employed to capture both the long and short-run
dynamics of the variables in the model. The results of the study indicate that the call
money rate has significant effect on investment and thus on economic growth. Therefore,
the preparation and implementation of financial policies may increase the investmentfriendly rate of interest to stimulate economic growth in Pakistan.
Nooreen Mujahid, Muhammad Noman, Nargis. (2019) THE NEXUS BETWEEN INVESTMENT AND INTEREST RATE: NEW DIMENSIONS FOR PAKISTAN, Journal of Social Science and Humanities, Volume 58, Issue 1.
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