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Trade Liberalisation, Financial Development and Economic Growth

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  • Muhammad Arshad Khan

    (Pakistan Institute of Development Economics, Islamabad)

  • Abdul Qayyum

    (Pakistan Institute of Development Economics, Islamabad)

Abstract

This paper empirically investigates the impact of trade and financial liberalisation on economic growth in Pakistan using annual observations over the period 1961-2005. The analysis is based on the bound testing approach of cointegration advanced by Pesaran, et al. (2001). The empirical findings suggest that both trade and financial policies play an important role in enhancing economic growth in Pakistan in the long-run. However, the short-run responses of the real deposit rate and trade policy variables are very low, suggesting further acceleration of the reform process. The feedback coefficient suggests a very slow rate of adjustment towards long-run equilibrium. The estimated equation remains stable over the period of study as indicated by CUSUM and CUSUMQ stability tests.

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Bibliographic Info

Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2007:19.

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Length: 34 pages.
Date of creation: 2007
Date of revision:
Handle: RePEc:pid:wpaper:2007:19

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Keywords: Trade Liberalisation; Financial Development; Economic Growth; Bound Test;

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Cited by:
  1. Muhammad, Shahbaz, 2012. "Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan," MPRA Paper 37391, University Library of Munich, Germany, revised 10 Mar 2012.
  2. 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.
  3. Qazi Hye, 2012. "Long term effect of trade openness on economic growth in case of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(4), pages 1137-1149, June.
  4. Muhammad Zakaria & Abdul Ghafar Ismail, 2012. "Does Islamic banks' securitization involvement restrain their financing activity?," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 28(3), pages 180-186, August.

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