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Financial Sector Reforms and International Trade Competitiveness: A Case Study of Pakistan

  • Hanif, M.N.
  • Husain, F.
  • Jafri, S.

This paper explores the relationship between financial development and international trade competitiveness in the case of Pakistan. An earlier study on this issue, Hanif and Jafri (2008), has some empirical limitations as it is based on Engle-Granger (1987) two steps procedure while dealing with multiple variables regressions. In this study we have used ARDL model by Pesaran, Shin and Smith (1999). We have also applied Johansen test for cointegration and checked the robustness of results established by the ARDL model. We have estimated the cointegration vector using Stock and Watson (1993) dynamic OLS method. We find a stable long run positive relationship between international trade competitiveness of Pakistan and its financial sector development. The estimated external finance elasticity of international trade competitiveness of textile sector in Pakistan is found to be 0.26 which is significantly higher than 0.17 estimated by Hanif and Jafri (2008).

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36730.

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Date of creation: 30 Jun 2008
Date of revision: 31 Jan 2012
Publication status: Published in Finance Research 1.1(2012): pp. 27-34
Handle: RePEc:pra:mprapa:36730
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  1. James B. Ang, 2007. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Monash Economics Working Papers 03-07, Monash University, Department of Economics.
  2. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  3. Beck, Thorsten, 2001. "Financial development and international trade : is there a link?," Policy Research Working Paper Series 2608, The World Bank.
  4. Hanif, Muhammad N. & Jafri, Sabina K., 2006. "Financial Development and Textile Sector Competitiveness: A Case Study of Pakistan," MPRA Paper 10271, University Library of Munich, Germany.
  5. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
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