Dynamic Modeling of Private Investment in Agricultural Sector of Pakistan

Imtiaz Ahmad, Abdul Qayyum


Agriculture is the single largest sector of the economy of
Pakistan, which has a large number of for warding and back warding
linkages. This sector is contributing 21 percent to GDP and employing 44
percent of the workforce. Like other developing countries, poverty in
Pakistan is a rural phenomenon; therefore, its development will be a
principal vehicle for alleviating poverty. Recent global food crises
again providing an opportunity for developing countries like Pakistan to
give more serious attention to the development of agriculture. There is
no doubt that development of agriculture depends on investment in this
sector. Investment is a central issue in macroeconomic theory; it plays
an important role in economic growth of a country as it raises the
productive capacity of the economy and promotes technological progress
through embodiment of new techniques. Investment spending is usually
volatile because it depends on multiple factors, and is responsible for
much of the fluctuations of GDP over the business cycle [Dornbush, et
al. (1999)]. Therefore, it is very important to explore the determinants
of investment. The Classicals (Smith, Ricardo, Say, Marshall, and
others) maintained that free markets are the best route to national
prosperity and economic growth, and there is no need of government
intervention to activate and regulate the economy. Keynesians (1936), on
the other hand, believed that there is need for government intervention
to activate and regulate the saving and investment behaviour of the

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DOI: https://doi.org/10.30541/v47i4IIpp.517-530


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