IMPACT OF AGRICALUTURE ON ECONOMIC GROWTH OF PAKISTAN

Abstract

This study investigates the dynamic relationship between agriculture and economic growth in Pakistan using annual time series data from 1976 to 2014. Employing advanced econometric techniques including the Augmented Dickey-Fuller (ADF) test, Johansen co-integration, and the Vector Error Correction Model (VECM), the research evaluates both the short-run and long-run associations among key macroeconomic variables: agricultural value added, GDP, foreign direct investment (FDI), trade openness, and energy use. The findings confirm that all variables are integrated of order one, and Johansen’s co-integration test reveals a long-term equilibrium relationship among them. The VECM analysis further indicates a significant short-run adjustment mechanism with a speed of convergence of 73% toward long-run equilibrium. The overall model exhibits strong explanatory power with an adjusted R-squared of 68%, and diagnostic tests confirm the stability and reliability of the model. The results empirically validate the hypothesis that agriculture plays a statistically significant role in influencing economic growth in Pakistan. Based on these insights, the study recommends targeted policy interventions aimed at enhancing agricultural productivity, expanding public investment, and integrating agriculture more effectively with industrial and trade sectors to support sustainable economic