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A Dynamic Macroeconometric Model of Pakistan’s Economy

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Author Info

  • Muhammad Arshad Khan

    (Pakistan Institute of Development Economics, Islamabad.)

  • Musleh ud Din

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

In this study, an attempt has been made of develop a dynamic macroeconometric model of Pakistan’s economy to examine the behaviour of major macroeconomic variables such as output, consumption, investment, government expenditure, money, interest rates, prices, exports, and imports. The model consists of 21 equations, of which 13 are behavioural and the rest are identities. The Engle-Granger two-step cointegration procedure is used to derive the long-run and short -run elasticities for the period 1972-2009. The test of significance of each estimated equation seems to validate the model. The estimated long-run parameters are used to perform simulation experiments to determine the model’s ability to track historical data and to assess the behaviour of the key macroeconomic variables in response to the changes in selected exogenous variables. The results indicate that the majority of macroeconomic variables follow an increasing trend over the period of simulation, 2009-2013.

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File URL: http://www.pide.org.pk/pdf/Working%20Paper/WorkingPaper-69.pdf
File Function: First Version, 2011
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Bibliographic Info

Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2011:69.

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Length: 52 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:pid:wpaper:2011:69

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Related research

Keywords: Macroeconometric Model; Pakistan Economy; Cointegration; Forecasting;

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Cited by:
  1. Inayat Ullah Mangla, 2011. "Reconstructing the Performance of Pakistan’s Political Economy: Another Paradigm," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 30-70, September.

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