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Trade Liberalization, Financial Sector Reforms and Growth

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  • Khan, M. Arshad
  • Qayyum, Abdul

Abstract

This paper empirically investigates the impact of trade and financial liberalization 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 growth in Pakistan in the long-run. However, the short-run response of real deposit rate and trade policy variable is very low, suggesting further acceleration of reform process. The feedback coefficient suggests a very slow rate of adjustment towards long-run equilibrium. The estimated short-run dynamics are stable as indicated by CUSUMQ test.

Suggested Citation

  • Khan, M. Arshad & Qayyum, Abdul, 2006. "Trade Liberalization, Financial Sector Reforms and Growth," MPRA Paper 2655, University Library of Munich, Germany, revised 2006.
    • Handle: RePEc:pra:mprapa:2655
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    3. Azra Khan & Sadia Safdar & Samina Bibi, 2021. "Fiscal Discretion And Aggregate Demand: A Case Study Of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(2), pages 204-220.
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    5. Uddin, Gazi Salah & Sjö, Bo & Shahbaz, Muhammad, 2013. "The causal nexus between financial development and economic growth in Kenya," Economic Modelling, Elsevier, vol. 35(C), pages 701-707.
    6. Kizito Uyi Ehigiamusoe & Hooi Hooi Lean, 2018. "Tripartite Analysis of Financial Development, Trade Openness and Economic Growth: Evidence from Ghana, Nigeria and South Africa," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(2), June.
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    8. Qazi Hye & Wee-Yeap Lau & Marie-Aimée Tourres, 2014. "Does economic liberalization promote economic growth in Pakistan? An empirical analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 2097-2119, July.
    9. Ali Gulzar, 2020. "Financial Sector Reforms and its Impact on Economy of Pakistan," Asian Journal of Law and Economics, De Gruyter, vol. 11(2), pages 1-18, August.
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    More about this item

    Keywords

    Financial Sector Reforms; Trade Liberalization; Growth; Pakistan;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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