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Impact of Trade Liberalization on Trade Balance in Pakistan: Cointegration and Error Correction Mechanism

Author

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  • Bushra Yasmin

    (Economics Department at Fatima Jinnah Women University, The Mall, Rawalpindi)

Abstract

This study traces out the way trade liberalization process affects the trade balance keeping into view the stationary nature of data used. The cointegration techniques and the error correction mechanism allow us to establish both, the short-run and the long-run relationship among different measures of trade liberalization and trade balance. The fi ndings suggest a signifi cant positive long-run relationship between trade liberalization and real exchange rate with trade balance while a signifi cant negative relationship with GDP for the time period 1970-2008 in Pakistan. Such results stress on to improve the trade balance through a pertinent change in trade composition by diversifying our export contents and enhanced competitiveness.

Suggested Citation

  • Bushra Yasmin, 2012. "Impact of Trade Liberalization on Trade Balance in Pakistan: Cointegration and Error Correction Mechanism," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 15(1), pages 73-88, May.
    • Handle: RePEc:zag:zirebs:v:15:y:2012:i:2:p:73-88
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    Citations

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    Cited by:

    1. Muhammad Ahad & Zaheer Anwer, 2021. "Asymmetric impact of oil price on trade balance in BRICS countries: Multiplier dynamic analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2177-2197, April.
    2. Muhammad Arshad Khan & Atif Ali Jaffri & Faisal Abbas & Azad Haider, 2017. "Does Trade Liberalization Improve Trade Balance in Pakistan?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(2), pages 158-183, September.

    More about this item

    Keywords

    Trade liberalization; trade balance; cointegration; Pakistan;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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