Estimation of the Harrod-Domar Growth Equation: Pakistan’s Case

Abstract

The Harrod-Domar growth model is an economic model that purports to explain the economic growth process by establishing a relationship between an economy’s saving rate, capital-output ratio, and GDP / GNP (national income) growth rate. Estimating the Harrod-Domar equation, using Pakistan’s data, would establish whether the model is relevant to Pakistan, and whether the model satisfactorily explains Pakistan’s economic growth. Since savings form an important part of the equation, estimating the savings function to identify its determinants would also prove beneficial. The savings function estimation would explain whether higher income levels and interest rates mobilize more savings in Pakistan.