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Is Pakistan's Growth Rate Balance-of-Payments Constrained? Policies and Implications for Development and Growth

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  • Jesus Felipe
  • J. S. L. McCombie
  • Kaukab Naqvi

Abstract

This paper examines the extent to which Pakistan's growth has been, or is likely to be, constrained by its balance of payments. Evidence presented suggests that Pakistan's maximum growth rate consistent with equilibrium on the basic balance is approximately 5% per annum. This is below the long-term target GDP growth rate of 7-8% per annum. This balance-of-payments constrained growth approach provides some important implications for Pakistan's development policy. Real exchange rate depreciations will not lead to an improvement in the current account. Pakistan must lift the constraints that impede higher growth in exports. In particular, it must shift its export structure towards more sophisticated products with a higher income elasticity of demand.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Oxford Development Studies.

Volume (Year): 38 (2010)
Issue (Month): 4 ()
Pages: 477-496

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Handle: RePEc:taf:oxdevs:v:38:y:2010:i:4:p:477-496

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Cited by:
  1. Alberto Bagnai & Arsène Rieber & Anh Dao Tran, 2013. "Economic growth and balance-of-payments constraint in Vietnam," a/simmetrie Working Papers Series 1302, Italian Association for the Study of Economic Asymmetries.
  2. Chassem, Nacisse Palissy, 2011. "Hypothèse de Thirlwall: cas des pays de la zone Franc
    [Thirlwall’s hypothesis : the case of countries of the Franc Zone]
    ," MPRA Paper 29990, University Library of Munich, Germany.

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