The study analysed the effect of foreign direct investment (FDI) on economic growth of Pakistan. Time series data for 35 years from 1979-2013 is utilized in this study. Impact of inflation (CPI) on GDP is also examined. Data of FDI, GDP and inflation is collected from world data bank. Multiple linear regression model is used to find out the impact of FDI and inflation on economic growth of Pakistan. Unit root test is used for stationarity of data. Results of the study show that FDI and inflation significantly affect economic growth of Pakistan. FDI has positive relationship with GDP while inflation has negative relationship with GDP. Keywords: ECONOMIC GROWTH, FDI, GDP, INFLATION
