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Trade Liberalisation, Financial Development and Economic Growth

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  • Muhammad Arshad Khan

    (PIDE)

  • Abdul Qayyum

Abstract

This paper empirically investigates the impact of trade and financial liberalisation on economic growth in Pakistan using annual observations over the period 1961-2005. The analysis is based on the bound testing approach of cointegration advanced by Pesaran, et al. (2001). The empirical findings suggest that both trade and financial policies play an important role in enhancing economic growth in Pakistan in the long-run. However, the short-run responses of the real deposit rate and trade policy variables are very low, suggesting further acceleration of the reform process. The feedback coefficient suggests a very slow rate of adjustment towards long-run equilibrium. The estimated equation remains stable over the period of study as indicated by CUSUM and CUSUMQ stability tests.

Suggested Citation

  • Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," Trade Working Papers 22204, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:tradew:22204
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    Cited by:

    1. Matthew McCartney, 2015. "The Missing Economic Magic: The Failure of Trade Liberalization and Exchange Rate Devaluation in Pakistan, 1980–2012," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 59-86, September.
    2. Ahmed, Gulzar & Arshad Khan, Muhammad & Afzal, Muhammad, 2015. "Trade Liberalization and Industrial Productivity: Evidence from Pakistan," MPRA Paper 70744, University Library of Munich, Germany, revised 15 Mar 2016.
    3. Muhammad Zakaria & Bashir Ahmad Fida, 2012. "Effects of globalization on women in Pakistan," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 28(3), pages 180-186, August.
    4. Matthew McCartney, 2011. "Pakistan, Growth, Dependency, and Crisis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 71-94, September.
    5. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    6. Abdul Jalil & Mete Feridun, 2011. "Impact of financial development on economic growth: empirical evidence from Pakistan," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 16(1), pages 71-80.
    7. Rafat MAHMOOD & Eatzaz AHMAD, 2015. "Measurement Of Import Smuggling In Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 25(2), pages 135-159.
    8. repec:taf:rjapxx:v:22:y:2017:i:3:p:454-476 is not listed on IDEAS
    9. repec:rjr:romjef:v::y:2018:i:3:p:117-130 is not listed on IDEAS
    10. Qazi Hye, 2012. "Long term effect of trade openness on economic growth in case of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(4), pages 1137-1149, June.

    More about this item

    Keywords

    Trade Liberalisation; financial development; economic growth; Bound Test;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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