Do Structural Transformation And Trade Liberalisation Cause Economic Growth In Pakistan?

Developing countries inherited weak and underdeveloped economies from colonial rulers. During the three decades (1950s, 1960s, 1970s) developing countries experimented with diverse development theories. During 1980s these countries faced current account and fiscal deficits problems. World Bank and IMF are playing a leading and dominant role to influence macroeconomic policies of the developing countries. We used four measures (two for liberalization and two for structural transformation) to empirically investigate the aforesaid policies in the context of Pakistan’s economy Empirical results show that except industry other variables (agriculture, openness, and financial integration) are not cointegrated. Openness Granger-causes economic growth that implies, on one hand, increasing international dependence of Pakistan’s economy particularly imports and on the other hand, partially supports the neoclassical view. There is long-run relationship between economic growth and structural transformation Use of traditional measures of openness and structural transformation suggests that the results are interpreted with care... Trade liberalisation is not necessarily a universal remedy.