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A structural VAR analysis of the impact of macroeconomic shocks on Pakistan's textile exports

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  • Chaudhry, Azam
  • Bukhari, Syed Kalim Hyder

Abstract

This paper creates a structural vector autoregression (SVAR) model which looks at the macroeconomic factors that impact the export of both finished and unfinished Pakistani textiles between 1980 and 2011. The analysis is unique in two ways: first, it separates unfinished (low value-added) textile exports from finished (high value-added) textile exports; second, it separates out the impact of aggregate exchange rate changes with respect to trading ‘partners’ from aggregate exchange rate changes with respect to trading ‘competitors’. We find that unfinished, or low value-added, Pakistani textile exports were positively impacted by the aggregate consumption of trading partners while finished, or high value-added, textile exports were negatively affected by these shocks. Also, a real depreciation of the Pakistani exchange rate leads to temporary increases in unfinished textile exports but sustained increases in the level of finished textile exports. Finally, positive shocks in the textile exports of competitor countries lead to temporary decreases in both unfinished and finished Pakistani textile exports, but these falls were followed by eventual increases in the exports of both.

Suggested Citation

  • Chaudhry, Azam & Bukhari, Syed Kalim Hyder, 2013. "A structural VAR analysis of the impact of macroeconomic shocks on Pakistan's textile exports," Economic Modelling, Elsevier, vol. 32(C), pages 302-315.
  • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:302-315 DOI: 10.1016/j.econmod.2013.01.043
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    References listed on IDEAS

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    1. Dilip Dutta & Nasiruddin Ahmed, 2004. "Trade liberalization and industrial growth in Pakistan: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1421-1429.
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    3. Azam Chaudhry & Phillip Garner, 2007. "Do Governments Suppress Growth? Institutions, Rent-Seeking, And Innovation Blocking In A Model Of Schumpeterian Growth," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 35-52, March.
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    8. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821, December.
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    Cited by:

    1. Bosupeng, Mpho, 2015. "On Exports and Economic Growth-Multifarious Economies Perspective," MPRA Paper 77922, University Library of Munich, Germany, revised 2015.
    2. Bosupeng, Mpho, 2015. "The Export-Led Growth Hypothesis: New Evidence and Implications," MPRA Paper 77917, University Library of Munich, Germany, revised Jun 2015.
    3. Bosupeng, Mpho, 2015. "Exports Multiplicity and The Dutch Disease," MPRA Paper 77919, University Library of Munich, Germany, revised 2015.

    More about this item

    Keywords

    Exports; Textiles; VAR; Pakistan;

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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