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Trade liberalization, economic size and macroeconomic volatility: Empirical evidence from Pakistan

Author

Listed:
  • Hira Mujahid

    (Applied Economics Research Center, University of Karachi, Karachi-75279)

  • Shaista Alam

    (Applied Economics Research Center, University of Karachi, Karachi-75279)

  • Nighat Bilgrami

    (Applied Economics Research Center, University of Karachi, Karachi-75279)

Abstract

The purpose of this study is to investigate the link between trade liberalization, government size and the macroeconomic volatility in case of Pakistan. For this purpose, study used time series data from 1967-2010 and employed co integration technique to find long run relationship. The results proposed that in long run trade liberalization and economic size create volatility in output. However consumption and investment volatilities are directly link with trade liberalization and government size has direct relationship with output and investment volatilities. It is proposed that increase in economic size may increase the investment and output volatilities in long run. Furthermore error correction model suggested that in short run output volatility, trade liberalization, and economic size are negatively linked whereas government size directly linked with output, consumption and investment volatility in the short run.

Suggested Citation

  • Hira Mujahid & Shaista Alam & Nighat Bilgrami, 2015. "Trade liberalization, economic size and macroeconomic volatility: Empirical evidence from Pakistan," E3 Journal of Business Management and Economics., E3 Journals, vol. 6(2), pages 027-037.
    • Handle: RePEc:etr:series:v:6:y:2015:i:02:p:027-037
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    Keywords

    Government Spending; Income; Macroeconomic Volatility; Population; Trade Liberalization;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other

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