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Internal and External Determinants of Economic Growth: A closer look at Pakistan’s Economy

Author

Listed:
  • Muhammad Jamil

    (Department of Management Sciences, COMSATS Institute of Information Technology, Lahore, Pakistan)

  • Rao Muhammad Atif

    (Department of Management Sciences, COMSATS Institute of Information Technology, Lahore, Pakistan)

  • Khalid Zaman

    (Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan)

Abstract

This study aims to investigate the impact of internal and external determinants of economic growth on the economic growth of Pakistan. Major internal determinants include stock of physical capital and developmental expenditures, while external determinants include trade openness and real effective exchange rate. In doing so, study utilizes the annual time series data from 1972 to 2011. Advanced Autoregressive Distributed Lag model (ARDL) approach has been employed for co-integration and error correction model (ECM) for short-run results. Empirical investigations indicate that developmental expenditures, physical capital and trade openness are positively correlated with economic growth in long run, while real effective exchange rate negatively and significantly affect economic growth in long run in case of Pakistan.

Suggested Citation

  • Muhammad Jamil & Rao Muhammad Atif & Khalid Zaman, 2013. "Internal and External Determinants of Economic Growth: A closer look at Pakistan’s Economy," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(49), pages 73-90, September.
    • Handle: RePEc:rej:journl:v:16:y:2013:i:49:p:73-90
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    References listed on IDEAS

    as
    1. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    2. 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.
    3. 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.
    4. Jim Love & Ramesh Chandra, 2005. "Testing export-led growth in South Asia," Journal of Economic Studies, Emerald Group Publishing, vol. 32(2), pages 132-145, May.
    5. Faiza Amjad & Naheed Zia Khan, 2004. "External Determinants of Growth and Growth Projections: SAARC and Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 737-755.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Economic growth; trade openness; real effective exchange rate; cointegration; Pakistan;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade

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