IMPACT OF TRADE OPENNESS ON OUTPUT GROWTH FOR PAKISTAN: AN EMPIRICAL INVESTIGATION
Abstract
The relationship between trade openness and growth is a highly debated topic. The empirical literature shows that trade openness or liberalization affects output growth. Most of the studies have concluded that the openness of the trade regime has positive relation with GDP growth [Ahmed, Yusuf and Anoruo Emmanuel (2000), Edwards, S., (1998), Edwards, S., (1992), Harrison, A., (1996), Iscan, Talan (1998), Santos Paulino (2002), Wacziarg R., (2001), Yanikkaya Halit (2003)].Pakistan has gradually liberalized its trade regime specially after 1988, when the government accepted the first IMF Structural Adjustment Program. After 1995, this policy gained greater momentum and WTO related compliances have induced Pakistan to reduce import duties and eliminate various subsidies.In this paper we analyze the impact of trade liberalization policy on GDP growth of Pakistan for the period ranging from 1972 to 2002. This paper consists of five sections. The next section reviews the empirical literature on trade openness. Section - 3 describes the model and data sources. Section - 4 reports the estimation results. Final section - 5 concludes the paper.References
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International Monetary Fund, International Financial Statistics, various issues,
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GMM stands for Generalized Method of Movements, which is a method of estimation.
Sinha (2000) follows measure trade liberalization as real exports plus imports
We measured growth of Trade Liberalization as (Exports + Imports)/GDP as used by Sinha (2000). The Exports + Imports is widely used as Trade Liberalization proxy. Wacziarg (2001) has mentioned that a country’s trade to GDP ratio can be viewed as resulting from trade policy.
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