Open AccessExport-Led Growth Hypothesis in Pakistan: A Reinvestigation Using the Bounds Test
Author(s) -
Saima Siddiqui,
Sameena Zehra,
Sadia Majeed,
Muhammad Sabihuddin Butt
Publication year - 2008
Publication title -
the lahore journal of economics
Language(s) - English
Resource type - Journals
eISSN - 1811-5446
pISSN - 1811-5438
DOI - 10.35536/lje.2008.v13.i2.a4
Subject(s) - economics , distributed lag , short run , gross domestic product , proxy (statistics) , real gross domestic product , liberalization , autoregressive model , cointegration , international economics , monetary economics , econometrics , macroeconomics , international trade , market economy , machine learning , computer science
Trade is presumed to act as a catalyst to economic growth. Thispaper reinvestigates the export-led growth hypothesis in Pakistan by usingannual time series data on exports, imports, terms of trade, and the laborforce participation rate as explanatory variables and gross domesticproduct (GDP) as the dependent variable for the period 1971-2005. Thestudy uses the more comprehensive and recent bounds test or autoregressivedistributed lag model (ARDL) proposed by Pesaran et al (2001) to examinethe existence of short-run and long-run relationships between exports andeconomic growth, which is crucial in designing policy to enhance traderelatedpotential in Pakistan. The results indicate that exports, labor force,and imports have a positive effect on growth, while the terms of trade hasa negative effect. The proxy for trade liberalization has a positive impacton economic growth. Finally, the chief finding of this study is that thehypothesis of export-led growth in the Pakistan economy is supported inboth the short and long run. Economic growth in Pakistan is accompaniedby fluctuations in exports and imports both in the short and long run, butthe labor force participation rate has a negative effect only in the shortrun. The terms of trade has the same effect in the short and long run.