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Dynamics of business cycle and long-term economic growth of Pakistan

Author

Listed:
  • Usama Ehsan KHAN

    (Trade Development Authority of Pakistan, Pakistan)

  • Syed Monis JAWED

    (Allied Bank Limited, Pakistan)

Abstract

The explanation of the potential sources of economic fluctuations is a key research domain in macroeconomics. The purpose of the study is to identify the potential factors that impose permanent and transitory shocks to the economy. We analyzed the macroeconomic fluctuations by decomposing time series of real gross domestic production (GDP) growth of Pakistan into the longrun trend and business cycles. The turning points chronology of business cycles is identified by using both HP filter and Markow regime switching model over 1951-2015. Second, the study explored the relationship between components of real GDP growth with macroeconomic variables by using Autoregressive Distributive Lag (ARDL) bound testing approach. It is found that the balance of trade and external debt played are primary drivers of business cycle fluctuations. However, trend components require GDP deflator and FDI additionally for a meaningful explanation. The results of the study would benefit policymakers by unraveling the characteristics of business cycles.

Suggested Citation

  • Usama Ehsan KHAN & Syed Monis JAWED, 2019. "Dynamics of business cycle and long-term economic growth of Pakistan," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(619), S), pages 173-184, Summer.
    • Handle: RePEc:agr:journl:v:xxvi:y:2019:i:2(619):p:173-184
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    References listed on IDEAS

    as
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