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Determinants of GDP Fluctuations in Selected South Asian Countries: A Macro-Panel Study

Author

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  • Ghulam Mohey-ud-din

    (Sr. Assistant Professor, Department of Management Sciences Department, Bahria University Lahore Campus, Pakistan)

  • Muhammad Wasif Siddiqi

    (Senior Visiting Professor, Department of Economics, GC University, Lahore)

Abstract

Now a days, the issue of volatility in GDP is becoming a fundamental development concern due to the undeniable connections between volatility and lack of development. In addition, the recognition of the negative link between short-term fluctuations and long-term growth not only signifies the importance of exploring this link but also stresses the importance of studying the determinants of the GDP fluctuations so that the efforts to manage these fluctuations can be made. Therefore, keeping in view, the importance of studying the factor causing fluctuations in GDP, the present study aims at exploring the determinants of GDP fluctuations using macro panel approach in a panel of five selected South Asian countries (SSAC) including Bangladesh, India, Nepal, Pakistan and Sri Lanka over the period of 1980-2010. For this purpose, modern non-stationary panel techniques such as cross section dependence test, second generation unit root test under cross sectional dependence, panel cointegration and Group Mean Fully Modified OLS (GM-FMOLS) estimation are applied. The results of the group mean FMOLS estimates show that aid dependence (AIDGDP), trade openness (OPEN), volatility in the price level (PRIVOL), reliance on agriculture (AGRGDP) and political stability (POLSTB) are the significant determinants of the GDP fluctuations. Thus, it is suggested that these determinants may be managed to reduce the volatility in GDP growth rate.

Suggested Citation

  • Ghulam Mohey-ud-din & Muhammad Wasif Siddiqi, 2016. "Determinants of GDP Fluctuations in Selected South Asian Countries: A Macro-Panel Study," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 483-497.
    • Handle: RePEc:pid:journl:v:55:y:2016:i:4:p:483-497
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    More about this item

    Keywords

    Determinants of GDP Fluctuations; Determinants of GDP Volatility; South Asia; Group Mean FMOLS; Panel Cointegration; Macro Panel; Business Cycle Fluctuations;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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