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Long-Run Relationship between Exports and Imports of Pakistan

Author

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  • Ali Farhan Chaudhry
  • Abdul Rauf Butt
  • Muhammad Irfan Chani

Abstract

The present study investigates dynamic relationship between exports and imports of Pakistan by using fiscal year data from1948-49 to 2012-13. ARDL co-integration technique has been employed to estimate the relationship and from empirical results, it is concluded that exports and imports are indeed co-integrated or in other words, long run equilibrium relationship does exist between exports and imports of Pakistan. It is further concluded that Pakistan is not violating its international budget constraints. VECM estimation also confirms that exports and imports are co-integrated and coefficient of error correction term indicates that in case of any departure from equilibrium exports adjust back at the speed of 17.147 percent of its last year disequilibrium value and it takes 5.832 years to fade away any impact caused by short term trade imbalances. Results obtained by Toda and Yamamoto (1995) test indicate that bi-directional causal relationship also exists between exports and imports of Pakistan. Findings of the current study has very important implications for policy makers to design such macroeconomic policies that can lead to establish long run equilibrium relationship between exports and imports adjusting short term trade deficit shocks to avoid violation of international budget constraints.

Suggested Citation

  • Ali Farhan Chaudhry & Abdul Rauf Butt & Muhammad Irfan Chani, 2017. "Long-Run Relationship between Exports and Imports of Pakistan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(8), pages 204-211, August.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:8:p:204-211
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    References listed on IDEAS

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    Cited by:

    1. Bakari, Sayef & Khalfallah, Sirine & Zidi, Ahmed, 2021. "The Determinants of Agricultural Exports: Empirical Validation for the Case of Tunisia," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 9(3), October.
    2. Sayef Bakari, 2017. "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.
    3. Sayef Bakari, 2017. "The Relationship between Export, Import, Domestic Investment and Economic Growth in Egypt: Empirical Analysis," EuroEconomica, Danubius University of Galati, issue 2(36), pages 34-43, November.
    4. Bakari, Sayef, 2017. "Why is South Africa Still a Developing Country?," MPRA Paper 80763, University Library of Munich, Germany.
    5. Mitra Lal Devkota, 2019. "Testing The Causality And Cointegration Between Exports, Imports, And Exchange Rates: Evidence From India," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 5-13, February.

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    More about this item

    Keywords

    ARDL Co-integration; exports and imports of Pakistan; VECM representation; causality;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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