Trade, Investment and Growth Nexus in Pakistan: An Application of Cointegration and Multivariate Causality Test
This paper develops a multivariate model to test the causality between exports and investment and economic growth in Pakistan. Most of the previous studies in this area have not paid any attention to stationarity and co-integration issues. The underlying series are tested and it was found that the series are non-stationary in their levels and not co-integrated. The Hsiao’s version of the Granger Causality method is used, the order in which the variables are entered into the model is also considered by using (SG) criterion, which is very important inthe multivariate frame work and it improves the robustness of the causality results. The results show that there exists a strong bi-directional causality between exports growth and investment growth to GDP growth. It was also found that exports growth causes imports growth, investment growth causesexports growth, and imports growth causes GDP growth and investment growth, but not the opposite. These findings support the fact that both exports and investment are considered as an engine of growth in Pakistan. The causal inferences are fairly stable over the sample period.
Volume (Year): 8 (2003)
Issue (Month): 1 (Jan-June)
|Contact details of provider:|| Postal: |
Phone: (92-42) 6560939
Web page: http://www.lahoreschoolofeconomics.edu.pk/EconomicsJournal/LJEIntro.aspx
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
- Voivodas, Constantin S., 1973. "Exports, foreign capital inflow and economic growth," Journal of International Economics, Elsevier, vol. 3(4), pages 337-349, November.
- Wu, De-Min, 1983. "Tests of Causality, Predeterminedness and Exogeneity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 547-58, October.
- Xiaming Liu & Haiyan Song & Peter Romilly, 1997. "An empirical investigation of the causal relationship between openness and economic growth in China," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1679-1686.
- Gordon, D.V. & Sakyi-Bekoe, K., 1990. "Testing the Export-Growth Hypothsis for Ghana," Department of Economics at Dalhousie University working papers archive 90-10, Dalhousie, Department of Economics.
- Kugler, Peter & Lenz, Carlos, 1993.
"Multivariate Cointegration Analysis and the Long-Run Validity of PPP,"
The Review of Economics and Statistics,
MIT Press, vol. 75(1), pages 180-84, February.
- Peter Kugler & Carlos Lenz, 1990. "Multivariate Cointegration Analysis and the Long-run Validity of PPP," Diskussionsschriften dp9004, Universitaet Bern, Departement Volkswirtschaft.
- Carlos Arnade & Utpal Vasavada, 1995. "Causality Between Productivity And Exports In Agriculture: Evidence From Asia And Latin America," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(2), pages 174-186.
- Ashfaque H. Khan & Afia Malik & Lubna Hasan, 1995.
"Exports, Growth and Causality: An Application of Co-integration and Error-correction Modelling,"
The Pakistan Development Review,
Pakistan Institute of Development Economics, vol. 34(4), pages 1001-1012.
- Khan, Ashfaque Hasan & Hasan, Lubna & Malik, Afia, 1995. "Exports, Growth and Causality:An Application of Co-Integration and Error-correction Modelling," MPRA Paper 7352, University Library of Munich, Germany.
- Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106.
- Kunst, Robert M. & Marin, Dalia, 1989.
"On Exports and Productivity: A Causal Analysis,"
Munich Reprints in Economics
3113, University of Munich, Department of Economics.
- Tyler, William G., 1981. "Growth and export expansion in developing countries : Some empirical evidence," Journal of Development Economics, Elsevier, vol. 9(1), pages 121-130, August.
- Esfahani, Hadi Salehi, 1991. "Exports, imports, and economic growth in semi-industrialized countries," Journal of Development Economics, Elsevier, vol. 35(1), pages 93-116, January.
- Muhammed Islam, 1998. "Export expansion and economic growth: testing for cointegration and causality," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 415-425.
- Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
- Yaghmaian, Behzad, 1994. "An empirical investigation of exports, development, and growth in developing countries: Challenging the neoclassical theory of export-led growth," World Development, Elsevier, vol. 22(12), pages 1977-1995, December.
- Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
- Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
- Serletis, Apostolos, 1992. "Export growth and Canadian economic development," Journal of Development Economics, Elsevier, vol. 38(1), pages 133-145, January.
- Thornton, Daniel L & Batten, Dallas S, 1985. "Lag-Length Selection and Tests of Granger Causality between Money and Income," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 164-78, May.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
- Caines, P. E. & Keng, C. W. & Sethi, S. P., 1981. "Causality analysis and multivariate Autoregressive modelling with an application to supermarket sales analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 3(1), pages 267-298, November.
- Kavoussi, Rostam M., 1984. "Export expansion and economic growth : Further empirical evidence," Journal of Development Economics, Elsevier, vol. 14(1), pages 241-250.
- Dani Rodrik, 1988. "Closing the Technology Gap: Does Trade Liberalization Really Help?," NBER Working Papers 2654, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:lje:journl:v:8:y:2003:i:1:p:119-137. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shahid Salahuddin)
If references are entirely missing, you can add them using this form.