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Effect of Openness to Trade and FDI on Industrial Sector Growth: A Case Study for Pakistan

Author

Listed:
  • Faiza Umer

    (Applied Economics Research Centre (AERC) University of Karachi)

  • Shaista Alam

    (Applied Economics Research Centre (AERC) University of Karachi)

Abstract

This present paper is analyzing the effect of trade openness and foreign direct investment (FDI) on industrial sector growth in Pakistan. This paper is examined that Pakistan’s industrial growth is affected by trade openness through a number of channels including monetary policy, fiscal policy, and Fdi. This study is employs Johansen and Juselius co-integration technique and Vector Error Correction Mechanism approach to estimate short run as well as long run relationship using annual time series data for the period 1960-2011. The study found that the relevant macro economic indicators Fdi and Real Gdp have positive and significant long run relationship with industrial sector growth while Trade openness and Inflation have negative long-run relationship with industrial sector growth also Real effective exchange rate have statistically insignificant results in long-run, on the other hand in short run lagged value of own industrial sector, Fdi, Reer, Real GDP have positive and significant impact on industrial sector growth. While inflation and trade openness shows insignificant relationship and Ec (-1) confirms long-run relationship among all independent variables.

Suggested Citation

  • Faiza Umer & Shaista Alam, 2013. "Effect of Openness to Trade and FDI on Industrial Sector Growth: A Case Study for Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(48), pages 179-198, June.
    • Handle: RePEc:rej:journl:v:16:y:2013:i:47:p:179-198
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    References listed on IDEAS

    as
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    Cited by:

    1. Musa Oduola & Mustapha O. Bello & Rahmon Popoola, 2022. "Foreign Direct Investment, Institution and Industrialisation in Sub-Saharan Africa," Economic Change and Restructuring, Springer, vol. 55(2), pages 577-606, May.
    2. Sayef Bakari, 2017. "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.
    3. Umar FAROOQ, 2023. "Trade Liberalization and Real Sector Investment Decisions: A Panel Data Evidence from Selected Economies of Asia," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 52-71, June.
    4. Keoudone KEOTHEPHAR & Vilayvanh SRITHILAT, 2024. "Assessing the Key Drivers of Sustainable Economic Growth in Laos: Emphasis on Infrastructure Investment," International Journal of Science and Business, IJSAB International, vol. 32(1), pages 1-15.
    5. Oludayo Elijah Adekunle & Samson Olusegun Akinwale, 2020. "Trade Liberalization and Manufacturing Sector in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(3), pages 90-96, September.

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    More about this item

    Keywords

    Industrial Sector Growth; Johansen-Juselius Cointegration Test; Vector Error Correction Mechanism.;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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