Determinants of Economic Growth in Afghanistan

Abstract

This study examines the determinants of economic growth in Afghanistan through the lens of economic growth theories. The primary objective of this research is to evaluate the effects of foreign direct investment (FDI), foreign aid, exports, and imports on Afghanistan's economic growth. In the quantitative section of the study, the Ordinary Least Squares (OLS) method and Co-integration techniques have been employed to identify the impact and long-term relationships of the independent variables. The OLS results indicate that foreign direct investment, imports, and exports have significant effects on Afghanistan's economic growth, while foreign aid does not show a significant impact. Additionally, Johansen Co-integration tests were used to determine the long-term relationships among the variables, and the findings confirm the existence of such a relationship. The study concludes that foreign direct investment has the greatest influence on Afghanistan’s economic growth. Based on these results, the researchers recommend that the Islamic Emirate of Afghanistan increase its focus on promoting foreign direct investment to achieve higher economic growth.