9th International Science Congress (ISC-2019).  International E-publication: Publish Projects, Dissertation, Theses, Books, Souvenir, Conference Proceeding with ISBN.  International E-Bulletin: Information/News regarding: Academics and Research

External Sector and Economic Growth of Pakistan: A Time Series Analysis

Author Affiliations

  • 1Scholar of Economics, University of Sargodha Lahore Campus, Lahore, PAKISTAN
  • 2 School of Economics, Bahauddin Zakariya University, Multan, PAKISTAN
  • 3 Department of Economics, Ghazi University, Dera Ghazi Khan, PAKISTAN

Int. Res. J. Social Sci., Volume 4, Issue (10), Pages 25-31, October,14 (2015)

Abstract

The purpose of the present study is to explore the impact of the indicators of external sector such as trade openness, foreign direct investment and external debt on economic growth of Pakistan by employing ARDL approach on time series data over the period of 1980 –2013. Some control variables i.e., education, labor force participation and physical capital have also been included in the model because they have a key role in explaining the economic growth as suggested by various growth theories. To check long run dynamics we used ARDL approach and to find out short run dynamics we used error correction model (ECM). The study concluded that there exists a long run as well short run relationship between indicators of external sector and the economic growth. Foreign direct investment and trade openness positively affect economic growth while the external debt negatively effects economic growth of Pakistan. The variable physical capital has significant positive impact on economic growth in long run and insignificant negative impact in short run, while education and labour force participation rate have significant positive association with economic growth in short as well as in long run. It is suggested that gross domestic product can be increased with the increase in education/skills, labour force participation, trade openness and foreign direct invest. External debt inhibits economic growth of Pakistan. Government and higher authorities should formulate such policies that enhance the level of openness, physical capital, foreign direct investment, education and labour force participation for sustained economic growth of Pakistan.

References

  1. Satija Kalpana1 and Patel Mohanm, Mainstreaming Women Employment and Human Development in Kheda District India- Sustainable Livelihood Approach to Poverty by UNDP, Int. Res. J. Social Sci, 1(3), 26-35, (2012)
  2. Kabadayi B., Human Development and Trade Openness: A Case Study on Developing Countries. Advances in Management and Appl. Econ.3(3), 193-199 (2013)
  3. Jha G.M., Agrawal A., Gupta A. and Mishra A.K., Determinants of FDI in South Asia, Int. Res. J. Social Sci, 2(1), 1-6, (2013)
  4. Burger J.M. and M. Krueger, A balanced approach to high-status achievement testing: An analysis of the literature with policy implications. Int. Elec. J. for lead. In Learn,7(4)(2003)
  5. Harrison A.M, Openness and growth: a time series, cross country analysis for developing countries, Journal of Dev. Econ., 48, 419-447, (1996)
  6. International Monetary Fund, How has globalization affected inflation? Worl. Econ. Outl.(2006)
  7. Ranis G. and Stewart F., Economic growth and human development. Worl. Dev.28(2), 197 (2000)
  8. Suri T., Boozer M.A. and Ranis G., Paths to success: The relationship between human development and economic growth. Worl. Dev.,39(4), 506-522 (2011)
  9. Pathania Rajni, Linkages between Export, Import and Capital Formation in India, International Int. Res. J. Social Sci.,2(3), 16-19, (2013)
  10. Romer David, Openness and Inflation. Theory and Evidence, Quar. J. of Econ., 108(4), 869-903, (1993)
  11. Aejung Kim, The Effects of the U.S. Hegemony on Economic Growth in East Asia, and the Middle East and North Africa, Int. Res. J. Social Sci.3(4), 1-7, (2014)
  12. Popovici O.C. and Calin A.C., Effective Tool for Improving the Central and Eastern European Countries Attractiveness for Foreign Direct Investment: Reducing Corruption, Int. Res. J. Social Sci.,2(7), 1-7, (2013)
  13. Zeren F. and Ari A., Trade Openness and Economic Growth: A Panel Causality Test, Int. J. of Busin. and Soc. Sci.,4(9), 317-324, (2013)
  14. Manni U.H. and Afzal M.N.I., Effect of Trade Liberalization on Economic Growth of Developing Countries: A Case of Bangladesh Economy, J. of Bus., Econ. and Fin.,1(2), 37-44, (2012)
  15. Asongu Simplice A., Globalization and Africa: Implications for Human Development, Munich Personal Repech Archive, (2012)
  16. Georgios K., Trade Openness and Economic Growth: Can we Estimate the Precise Effect? App. Eco. and Int. Dev., 3(1), 7-25, (2003)
  17. Yanikkaya H., Trade openness and economic growth: a cross-country empirical investigation, J. of Dev. Eco., 72,57-89, (2003)
  18. Reuveny, Rafeal and Li, Quan., Economic Openness, Democracy, and Income Inequality: An Empirical Analysis, Comp. Pol. Stu., 36(5), 575-601 (2003)
  19. Eusufzai Zaki, Openness, Economic Growth, and Development: Some Further Results." Eco. Dev. and Cul. Change.,44, 333-338, (1996)
  20. Gregory Allan W. and Bruce E., Hansen Residual-based tests for co-integration in models with regime shifts, J. of Econometrics, 70, 99-126, (1996)
  21. Pesaran M. Hashem, Yongcheol Shin and Richard J. Smith, Bounds Testing Approach to the Analysis of Level Relationships. J. of Appl. Econometrics, 16, 289-326, (2001)
  22. Fosu, Oteng-Abayie Eric and Frimpong Joseph Magnus, Bounds Testing Approach to Cointegration: An examination of Foreign Direct Investment Trade and Growth relationships. American J. of Appl. Sci., 3(11), 2079-2085, (2006)
  23. Olusegun, Omisakin Oluwatosin Adeniyi and Ayool Omojolaibi, Foreign Direct Investment, Trade Openness and Growth in Nigeria, J. of Eco. Theo.,3(2), 13-18, (2009)
  24. Sezgin Selami and JuLideYildirim Introduction: symposium on Defense Economics, Def. and Pea. Eco.14(2),105–106, (2002)
  25. Zakaria M. and Ahmed A., Openness–Growth Nexus in Pakistan: A Macro–Econometric Analysis. Argumenta Oeconomica, 30(1), 47-84, (2013)
  26. Chaudhry I.S., Malik A. and Faridi M.Z., Exploring the causality relationship between trade liberalization, human capital and economic growth: Empirical evidence from Pakistan, Journal of Econ and Int. Fin., 2(8), 175-182, (2010)
  27. Bakare A.S., The consequences of trade liberalization for economic growth in Nigeria: A stochastic investigation. Contemp Marketing Review, 1(4), 14 – 23, (2011)
  28. Beaugrand P., Loko B. and Mlachila M., The Choice Between External and Domestic Debt in Financing Budget Deficits: The Case of Central and West African Countries', IMF Working Paper, 79, (2002)