IDEAS home Printed from https://ideas.repec.org/a/lje/journl/v16y2011ispp71-94.html
   My bibliography  Save this article

Pakistan, Growth, Dependency, and Crisis

Author

Listed:
  • Matthew McCartney

    (School of Oriental and African Studies (SOAS), University of London.)

Abstract

Compared to the historical and even contemporary experience of India, Pakistan has long been regarded as a “dependent” economy. Gross domestic product growth in Pakistan is typically argued to be contingent on external factors: trade, financial flows, and the interdependence of asset markets. Beyond the rhetoric, there is only ambiguous and contradictory empirical evidence to support this view. This paper offers a new methodology, that of case studies of growth and stagnation, to test the hypothesis of dependency. The results show that growth in Pakistan is influenced by external factors, but that growth is driven primarily by the dynamics of the domestic economy.

Suggested Citation

  • Matthew McCartney, 2011. "Pakistan, Growth, Dependency, and Crisis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 71-94, September.
    • Handle: RePEc:lje:journl:v:16:y:2011:i:sp:p:71-94
    as

    Download full text from publisher

    File URL: http://121.52.153.179/JOURNAL/LJE%2016%20se/04%20McCartney%20Pakistan,%20Growth,%20Dependency.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zeshan Atique & Mohsin Hasnain Ahmad & Usman Azhar, 2004. "The Impact of FDI on Economic Growth under Foreign Trade Regimes: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 707-718.
    2. Abid Hameed & Hammad Ashraf, 2006. "Stock Market Volatility and Weak-form Efficiency: Evidence from an Emerging Market," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 1029-1040.
    3. Knowles, Stephen & Garces-Ozanne, Arlene, 2003. "Government Intervention and Economic Performance in East Asia," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 451-477, January.
    4. G.M. Radhu, 1973. "Transfer of Technical Know-How Through Multinational Corporations in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 12(4), pages 361-374.
    5. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January.
    6. Qazi Masood Ahmed & Mohammad Sabihuddin Butt & Shaista Alam, 2000. "Economic Growth, Export, and External Debt Causality: The Case of Asian Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 591-608.
    7. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
    8. Hansen, Bruce E, 1997. "Approximate Asymptotic P Values for Structural-Change Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 60-67, January.
    9. Ricardo Hausmann & Lant Pritchett & Dani Rodrik, 2005. "Growth Accelerations," Journal of Economic Growth, Springer, vol. 10(4), pages 303-329, December.
    10. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    11. Berthelemy, Jean-claude & Soderling, Ludvig, 2001. "The Role of Capital Accumulation, Adjustment and Structural Change for Economic Take-Off: Empirical Evidence from African Growth Episodes," World Development, Elsevier, vol. 29(2), pages 323-343, February.
    12. Brian J. Aitken & Ann E. Harrison, 2022. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 6, pages 139-152, World Scientific Publishing Co. Pte. Ltd..
    13. Islam, Nurul, 1972. "Foreign Assistance and Economic Development: The Case of Pakistan," Economic Journal, Royal Economic Society, vol. 82(325), pages 502-530, Supplemen.
    14. Mohammad Akbar & Sabahat Zareen F. Naqvi, 2000. "Export Diversification and the Structural Dynamics in the Growth Process: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 573-589.
    15. Zahir Shah & Qazi Masood Ahmed, 2003. "The Determinants of Foreign Direct Investment in Pakistan: an Empirical Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 697-714.
    16. Mkandawire, Thandika, 2001. "Thinking about Developmental States in Africa," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 289-313, May.
    17. Musleh-Ud Din & Ejaz Ghani & Omer Siddique, 2003. "Openness and Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 795-807.
    18. Zafar Iqbal & Ghulam Mustafa Zahid, 1998. "Macroeconomic Determinants of Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(2), pages 125-148.
    19. Dani Rodrik & Arvind Subramanian, 2005. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 193-228, September.
    20. Chakraborty, Chandana & Nunnenkamp, Peter, 2008. "Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis," World Development, Elsevier, vol. 36(7), pages 1192-1212, July.
    21. V.N. Balasubramanyam, 2008. "Foreign Direct Investment," Chapters, in: Amitava Krishna Dutt & Jaime Ros (ed.), International Handbook of Development Economics, Volumes 1 & 2, volume 0, chapter 39, Edward Elgar Publishing.
    22. Kenny, Charles & Williams, David, 2001. "What Do We Know About Economic Growth? Or, Why Don't We Know Very Much?," World Development, Elsevier, vol. 29(1), pages 1-22, January.
    23. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
    24. Amjad,Rashid, 2008. "Private Industrial Investment in Pakistan," Cambridge Books, Cambridge University Press, number 9780521053617.
    25. Rodrik, Dani, 2005. "Growth Strategies," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 14, pages 967-1014, Elsevier.
    26. Naheed Aslam, 1987. "The Impact of Foreign Capital Inflow on Savings and Investment: The Case of Pakmtan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(4), pages 787-789.
    27. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December.
    28. Zafar Iqbal, 1997. "Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(2), pages 115-129.
    29. Dholakia, Ravindra H., 1994. "Spatial Dimension of the Acceleration of Economic Growth in India," IIMA Working Papers WP1994-02-01_01243, Indian Institute of Management Ahmedabad, Research and Publication Department.
    30. Keith B. Griffin, 1965. "Financing Development Plans in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 5(4), pages 601-630.
    31. Ashfaque H. Khan & Lubna Hasan & Afia Malik, 1992. "Dependency Ratio, Foreign Capital Inflows and the Rate of Savings in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 31(4), pages 843-856.
    32. Amjad, Rashid, 1984. "The management of Pakistan's economy 1947-82," MPRA Paper 35850, University Library of Munich, Germany.
    33. Franco-Rodriguez, Susana & Morrissey, Oliver & McGillivray, Mark, 1998. "Aid and the Public Sector in Pakistan: Evidence with Endogenous Aid," World Development, Elsevier, vol. 26(7), pages 1241-1250, July.
    34. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," Trade Working Papers 22204, East Asian Bureau of Economic Research.
    35. Zafar Iqbal, 1994. "Macroeconomic Effects of Adjustment Lending in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 1011-1031.
    36. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    37. Shahid Amjad Chaudhry, 1970. "Private Foreign Investment in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 10(1), pages 100-111.
    38. Krueger, Anne O, 1998. "Why Trade Liberalisation Is Good for Growth," Economic Journal, Royal Economic Society, vol. 108(450), pages 1513-1522, September.
    39. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    40. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    41. Fazal Husain & Tariq Mahmood, 2001. "The Stock Market and the Economy in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(2), pages 107-114.
    42. Jamshed Y. Uppal, 1993. "The Internationalisation of the Pakistani Stock Market: An Empirical Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 605-618.
    43. Arvind Virmani, 2006. "India's Economic Growth History: Fluctuations, Trends, Break Points and Phases," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(1), pages 81-103, July.
    44. Sarfraz K. Qureshi & Musleh-Ud Din & Ejaz Ghani & Kalbe Abbas, 1997. "Domestic Resource Mobilisation for Development in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(4), pages 891-912.
    45. Shahrukh Rafi Khan, 1997. "Has Aid Helped in Pakistan?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(4), pages 947-957.
    46. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    47. Shahbaz Nasir & Mahmood Khalid, 2004. "Saving-investment Behaviour in Pakistan: An Empirical Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 665-682.
    48. Zafar Iqbal, 1993. "Institutional Variations in Saving Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 1293-1311.
    49. Romain Wacziarg, 2002. "Review of Easterly's The Elusive Quest for Growth," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 907-918, September.
    50. Ahmed M. Khalid & Gulasekaran Rajaguru, 2006. "Financial Market Integration in Pakistan: Evidence Using Post-1999 Data," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 1041-1053.
    51. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August.
    52. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    53. Ejaz Ghani & Musleh-Ud Din, 2006. "The Impact of Public Investment on Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(1), pages 87-98.
    54. Muhammad Arshad Khan & Abdul Qayyum & Saeed Ahmed Sheikh, 2005. "Financial Development and Economic Growth: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 819-837.
    55. S. Narayan, 2009. "India," Chapters, in: Peter Draper & Philip Alves & Razeen Sally (ed.), The Political Economy of Trade Reform in Emerging Markets, chapter 7, Edward Elgar Publishing.
    56. AkIn, Cigdem & Kose, M. Ayhan, 2008. "Changing nature of North-South linkages: Stylized facts and explanations," Journal of Asian Economics, Elsevier, vol. 19(1), pages 1-28, February.
    57. Rizwan Tahir, 1995. "Defence Spending and Economic Growth: Re-examining the Issue of Causality for Pakistan and India," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 1109-1117.
    58. Aslam Farid & Javed Ashraf, 1995. "Volatility at Karachi Stock Exchange," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 651-657.
    59. Mohsin Hasnain Ahmad & Shaista Alam & Mohammad Sabihuddin Butt, 2003. "Foreign Direct Investment, Exports, and Domestic Output in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 715-723.
    60. Zafar Mahmood & Mohammad Ali Qasim, 1992. "Foreign Trade Regime and Savings in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 31(4), pages 883-893.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Younis, Fizza & Chaudhary, Aslam & Akbar, Muhammad, 2015. "Pattern of Development and Sustainable Economic Growth In Pakistan: A Descriptive Analysis," MPRA Paper 71473, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Derek Headey, 2008. "The Principal Components of Growth in the Less Developed Countries," Kyklos, Wiley Blackwell, vol. 61(4), pages 568-598, November.
    2. Matthew McCartney, 2015. "The Missing Economic Magic: The Failure of Trade Liberalization and Exchange Rate Devaluation in Pakistan, 1980–2012," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 59-86, September.
    3. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," PIDE-Working Papers 2007:19, Pakistan Institute of Development Economics.
    4. Yongzheng Yang & Mr. Robert Powell & Mr. Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 2005/179, International Monetary Fund.
    5. Jerzmanowski, Michal & Cuberes, David, 2011. "Medium Term Growth: The Role of Policies and Institutions," MPRA Paper 94273, University Library of Munich, Germany, revised 15 Jul 2011.
    6. Mr. Juan Zalduendo & Ms. Catia Batista, 2004. "Can the IMF's Medium-Term Growth Projections Be Improved?," IMF Working Papers 2004/203, International Monetary Fund.
    7. Dehn, Jan, 2000. "The effects on growth of commodity price uncertainty and shocks," Policy Research Working Paper Series 2455, The World Bank.
    8. Muhammed Islam, 2005. "Regime changes, economic policies and the effect of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 41(8), pages 1467-1492.
    9. Vatcharin Sirimaneetham & Jonathan Temple, 2006. "Macroeconomic policy and the distribution of growth rates," Bristol Economics Discussion Papers 06/584, School of Economics, University of Bristol, UK.
    10. Muhammad Arshad Khan & Abdul Qayyum, 2006. "Trade Liberalisation, Financial Sector Reforms, and Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 711-731.
    11. Crafts, Nicholas & O’Rourke, Kevin Hjortshøj, 2014. "Twentieth Century Growth*This research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546.," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 263-346, Elsevier.
    12. Dutz, Mark & Hayri, Aydin, 1999. "Does More Intense Competition Lead to Higher Growth?," CEPR Discussion Papers 2249, C.E.P.R. Discussion Papers.
    13. Jan Dehn, 2000. "Commodity Price Uncertainty and Shocks: Implications for Economic Growth," Economics Series Working Papers WPS/2000-10, University of Oxford, Department of Economics.
    14. Derek Headey, 2007. "What Professor Rodrik Means by Policy Reform: Appraising a Post-Washington Paradigm," CEPA Working Papers Series WP052007, School of Economics, University of Queensland, Australia.
    15. Greenaway, David & Morgan, Wyn & Wright, Peter, 2002. "Trade liberalisation and growth in developing countries," Journal of Development Economics, Elsevier, vol. 67(1), pages 229-244, February.
    16. Shagufta Sultana, "undated". "Does Foreign Aid Affect Economic Growth In Pakistan? A Disaggregate Analysis," Review of Socio - Economic Perspectives 201945, Reviewsep.
    17. Ahmed, Vaqar & Wahab Siddiqui, Abdul, 2010. "Nexus between aid and security: the case of Pakistan," MPRA Paper 29310, University Library of Munich, Germany.
    18. Abdul, waheed & Syed tehseen, jawaid, 2010. "Inward foreign direct investment and aggregate imports: time series evidence from Pakistan," MPRA Paper 31270, University Library of Munich, Germany.
    19. Sundar Ponnusamy, 2022. "Export specialization, trade liberalization and economic growth: a synthetic control analysis," Empirical Economics, Springer, vol. 63(2), pages 637-669, August.
    20. Dierk Herzer & Oliver Morrissey, 2009. "The Long-Run Effect of Aid on Domestic Output," Discussion Papers 09/01, University of Nottingham, CREDIT.

    More about this item

    Keywords

    Economic Growth; Dependency; Crisis; Pakistan.;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lje:journl:v:16:y:2011:i:sp:p:71-94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shahid Salahuddin (email available below). General contact details of provider: https://edirc.repec.org/data/lsecopk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.