IDEAS home Printed from https://ideas.repec.org/p/sbp/wpaper/20.html
   My bibliography  Save this paper

Financial Development and Textile Sector Competitiveness: A Case Study of Pakistan

Author

Listed:
  • Muhammad Nadeem Hanif

    (State Bank of Pakistan)

  • Sabina Khurram Jafri

    (State Bank of Pakistan)

Abstract

This paper makes an attempt to explore the relationship between the financial development and international trade competitiveness in the case of Pakistan – an issue that has not been investigated earlier. We construct Balassa’s Revealed Comparative Advantage (RCA) index for textile sector of Pakistan. Using ratio of credit extended to the textile sector to the total non-government credit of the banking system (TCS) as proxy for external finance, we estimate long run relationship and ECM, between RCA index and TCS while controlling for other determinants of the international trade competitiveness of textile sector of Pakistan. In line with the findings of Beck (2002) and Fanelli and Medhora (2002), our results suggest that dependence on external finance has a positive impact on the country’s textile sector competitiveness both in the short and the long run even when we control for traditional determinants of competitiveness. Length: 23 pages

Suggested Citation

  • Muhammad Nadeem Hanif & Sabina Khurram Jafri, 2008. "Financial Development and Textile Sector Competitiveness: A Case Study of Pakistan," SBP Working Paper Series 20, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:20
    as

    Download full text from publisher

    File URL: http://www.sbp.org.pk/repec/sbp/wpaper/wp20.pdf
    File Function: First version, 2008
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kletzer, Kenneth & Bardhan, Pranab, 1987. "Credit markets and patterns of international trade," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 57-70, October.
    2. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    3. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    4. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    6. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    7. Beck, Thorsten, 2002. "Financial development and international trade: Is there a link?," Journal of International Economics, Elsevier, vol. 57(1), pages 107-131, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khurram Shahzad, 2015. "An RCA Analysis of Textiles and Clothing in Pakistan, India, and Bangladesh," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(1), pages 157-168, Jan-June.
    2. Shah Mehmood WAGAN, 2015. "Export boost of textile industry of Pakistan by availing EU’s GSP Plus," Journal of Economics Library, KSP Journals, vol. 2(1), pages 18-27, March.
    3. Cvetković Milica & Petrović-Ranđelović Marija, 2017. "The Analysis of Agricultural Products Export Competitiveness of the Republic of Serbia Based on the RCA Index," Economic Themes, Sciendo, vol. 55(3), pages 399-420, September.
    4. Wagan, Shah Mehmood, 2015. "Export boost of Textile Industry of Pakistan by availing EU’s GSP Plus," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(1), pages 18-27.
    5. Akmal, Nadeem & Akhtar, Waqar & Shah, Hassnain & Niazi, Muhammad Azam & Saleem, Tariq, 2014. "The Structure and Competitiveness of Pakistan’s Basmati Rice Exports," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 4(04), pages 1-9, April.
    6. Naheed Memon & Faiza Rehman & Fazal Rabbi, 2014. "Should Pakistan Liberalize Trade With India Against the Backdrop of the FTA with China? A Comparative Advantage Analysis for the Manufacturing Sector," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(Special E), pages 327-348, September.
    7. repec:lje:journl:v:19:y:2015:i:1:p:157-168 is not listed on IDEAS
    8. Sadaf Shahab & Muhammad Tariq Mahmood, 2013. "Comparative Advantage of Leather Industry in Pakistan with Selected Asian Economies," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 133-139.
    9. Hanif, M.N. & Husain, F. & Jafri, S., 2008. "Financial Sector Reforms and International Trade Competitiveness: A Case Study of Pakistan," MPRA Paper 36730, University Library of Munich, Germany, revised 31 Jan 2012.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yongfu Huang & Jonathan Temple, 2005. "Does external trade promote financial development?," Bristol Economics Discussion Papers 05/575, School of Economics, University of Bristol, UK.
    2. Muhammad Nadim Hanif & Sabina Khurram Jafri, 2008. "Financial Development and Textile Sector Competitiveness," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 9(1), pages 141-158, June.
    3. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 263-315, Elsevier.
    4. Gnangnon, Sèna Kimm, 2019. "Financial Development and Tax Revenue in Developing Countries: Investigating the International Trade and Economic Growth Channels," EconStor Preprints 206628, ZBW - Leibniz Information Centre for Economics.
    5. Dilli Raj Khanal, 2007. "Banking and Insurance Services Liberalization and Development in Bangladesh, Nepal, and Malaysia: A Comparative Analysis," Working Papers 4107, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    6. Kim, Dong-Hyeon & Lin, Shu-Chin & Suen, Yu-Bo, 2010. "Dynamic effects of trade openness on financial development," Economic Modelling, Elsevier, vol. 27(1), pages 254-261, January.
    7. Iacovone, Leonardo & Ferro, Esteban & Pereira-López, Mariana & Zavacka, Veronika, 2019. "Banking crises and exports: Lessons from the past," Journal of Development Economics, Elsevier, vol. 138(C), pages 192-204.
    8. Ashis Kumar Pradhan & Gourishankar S Hiremath, 2020. "Do external commercial borrowings and financial development affect exports?," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1796269-179, January.
    9. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    10. Maryam Almasifard & Sasan Torabzadeh Khorasani, 2017. "Relationship Between Domestic Production in Agricultural and Industrial Sectors and Purchasing Power by Controlling for International Trade Variables (Iran)," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 244-253.
    11. Jagadish Prasad Bist & Nar Bahadur Bista, 2018. "Finance–Growth Nexus in Nepal: An Application of the ARDL Approach in the Presence of Structural Breaks," Vikalpa: The Journal for Decision Makers, , vol. 43(4), pages 236-249, December.
    12. Do, Quy-Toan & Levchenko, Andrei A., 2007. "Comparative advantage, demand for external finance, and financial development," Journal of Financial Economics, Elsevier, vol. 86(3), pages 796-834, December.
    13. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers 05/580, School of Economics, University of Bristol, UK.
    14. Rajesh Sharma & Samaresh Bardhan, 2017. "Finance growth nexus across Indian states: evidences from panel cointegration and causality tests," Economic Change and Restructuring, Springer, vol. 50(1), pages 1-20, February.
    15. Kalina Manova, 2013. "Credit Constraints, Heterogeneous Firms, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(2), pages 711-744.
    16. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    17. Katharina Diekmann & Frank Westermann, 2010. "Financial Development and Sectoral Output Growth in 19th Century Germany," IEER Working Papers 86, Institute of Empirical Economic Research, Osnabrueck University.
    18. N. R. Ramírez-Rondán & Marco E. Terrones & Andrea Vilchez, 2020. "Does financial sector development affect the growth gains from trade openness?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 475-515, August.
    19. Juan Carluccio & Thibault Fally, 2012. "Global Sourcing under Imperfect Capital Markets," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 740-763, August.
    20. OZTURK, Ilhan, 2008. "Financial Development And Economic Growth: Evidence From Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 85-98.

    More about this item

    Keywords

    Financial development; international trade; credit; competitiveness;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbp:wpaper:20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Faisal Saleem (email available below). General contact details of provider: https://edirc.repec.org/data/sbpgvpk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.