Export-led growth in Pakistan: a sectoral analysis

The study investigates the relationship between disaggregated exports and non-export GDP in order to classify exports in terms of their contribution to the long-term sustainable growth of Pakistan. Using the autoregressive distributed lag model on time-series data over the period 1972–2020, the results confirm the existence of a long-term relationship between non-export GDP and aggregate and disaggregated exports. Furthermore, the results show that aggregate, manufacturing, and services exports have a significant positive effect on non-export GDP, while primary and semi-manufactured exports show insignificant effects on non-export GDP. However, with further decomposition, the analyses of primary and manufacturing export categories show an individual impact on non-export GDP that is positive and significant in the case of majority export categories. The study concludes that the export-led growth hypothesis is relevant for Pakistan. However, there are substantial differences in the effects of exports on non-export GDP across various export categories. In Pakistan’s case, services, food items, and value-added manufactured exports contribute more to the output growth. Hence, it is suggested that Pakistan should pursue export promotion policy with greater emphasis on services, food items, and value-added manufactured exports to contribute sufficiently to the economic growth of the country.