IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v32y2013icp302-315.html
   My bibliography  Save this article

A structural VAR analysis of the impact of macroeconomic shocks on Pakistan's textile exports

Author

Listed:
  • Chaudhry, Azam
  • Bukhari, Syed Kalim Hyder

Abstract

This paper creates a structural vector autoregression (SVAR) model which looks at the macroeconomic factors that impact the export of both finished and unfinished Pakistani textiles between 1980 and 2011. The analysis is unique in two ways: first, it separates unfinished (low value-added) textile exports from finished (high value-added) textile exports; second, it separates out the impact of aggregate exchange rate changes with respect to trading ‘partners’ from aggregate exchange rate changes with respect to trading ‘competitors’. We find that unfinished, or low value-added, Pakistani textile exports were positively impacted by the aggregate consumption of trading partners while finished, or high value-added, textile exports were negatively affected by these shocks. Also, a real depreciation of the Pakistani exchange rate leads to temporary increases in unfinished textile exports but sustained increases in the level of finished textile exports. Finally, positive shocks in the textile exports of competitor countries lead to temporary decreases in both unfinished and finished Pakistani textile exports, but these falls were followed by eventual increases in the exports of both.

Suggested Citation

  • Chaudhry, Azam & Bukhari, Syed Kalim Hyder, 2013. "A structural VAR analysis of the impact of macroeconomic shocks on Pakistan's textile exports," Economic Modelling, Elsevier, vol. 32(C), pages 302-315.
    • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:302-315
    DOI: 10.1016/j.econmod.2013.01.043
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999313000473
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2013.01.043?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dilip Dutta & Nasiruddin Ahmed, 2004. "Trade liberalization and industrial growth in Pakistan: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1421-1429.
    2. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 10(Win), pages 2-16.
    3. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    4. Jim Love & Ramesh Chandra, 2004. "Testing Export‐Led Growth in India, Pakistan and Sri Lanka Using a Multivariate Framework," Manchester School, University of Manchester, vol. 72(4), pages 483-496, July.
    5. Mohsin Hasnain Ahmad & Shaista Alam & Mohammad Sabihuddin Butt, 2003. "Foreign Direct Investment, Exports, and Domestic Output in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 715-723.
    6. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    7. Azam Chaudhry & Phillip Garner, 2007. "Do Governments Suppress Growth? Institutions, Rent‐Seeking, And Innovation Blocking In A Model Of Schumpeterian Growth," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 35-52, March.
    8. Zehra Aftab & Aurangzeb, 2002. "The Long-run and Short-run Impact of Exchange Rate Devaluation on Pakistan's Trade Performance," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(3), pages 277-286.
    9. Mohammad Akbar & Sabahat Zareen F. Naqvi, 2000. "Export Diversification and the Structural Dynamics in the Growth Process: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 573-589.
    10. M. Aynul Hasan & Ashfaque H. Khan, 1994. "Impact of Devaluation on Pakistan's External Trade: An Econometric Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 1205-1215.
    11. Mohammad Afzal, 2006. "Causality between exports, world income and economic growth in Pakistan," International Economic Journal, Taylor & Francis Journals, vol. 20(1), pages 63-77.
    12. Sajjad Akhtar & Fauzia Malik, 2000. "Pakistan’s Trade Performance vis-à-vis Its Major Trading Partners," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(1), pages 37-50.
    13. Azam Chaudhry, 2011. "Tariffs, Trade and Economic Growth in a Institutionals Quality," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 31-54, Jul-Dec.
    14. Azam Chaudhry & Phillip Garner, 2006. "Political Competition Between Countries and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 666-682, November.
    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. Bosupeng, Mpho, 2015. "On Exports and Economic Growth-Multifarious Economies Perspective," MPRA Paper 77922, University Library of Munich, Germany, revised 2015.
    2. Bosupeng, Mpho, 2015. "The Export-Led Growth Hypothesis: New Evidence and Implications," MPRA Paper 77917, University Library of Munich, Germany, revised Jun 2015.
    3. Kepulaje Abhaya Kumar & Prakash Pinto & Iqbal Thonse Hawaldar & Cristi Spulbar & Ramona Birau, 2021. "Crude oil futures to manage the price risk of natural rubber: Empirical evidence from India," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(10), pages 423-434.
    4. Bosupeng, Mpho, 2015. "Exports Multiplicity and The Dutch Disease," MPRA Paper 77919, University Library of Munich, Germany, revised 2015.
    5. Morad Bali & Thanh T. Nguyen & Lincoln F. Pratson, 2024. "Impacts of EU Sanctions Levied in 2014 on Individual European Countries' Exports to Russia: Winners and Losers," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 50(2), pages 154-194, April.

    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. 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. Shaghil Ahmed & Iffat Ara & Kalim Hyder, 2006. "How External Shocks and Exchange Rate Depreciations Affect Pakistan? Implications for Choice of an Exchange Rate Regime," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 61-68.
    3. Shahbaz, Muhammad & Jalil, Abdul & Islam, Faridul, 2010. "Real Exchange Rate Changes and Trade Balance in Pakistan: A Revisit," MPRA Paper 27631, University Library of Munich, Germany.
    4. Usama Ehsan Khan, Muhammad Umar Zahid, Afshan Uroos, Aamir Hussain Siddiqui, 2018. "Impact of Devaluation on Balance of Trade: A Context of Neighboring Countries," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 3(2), pages 68-77, October.
    5. Mohsen Bahmani-Oskooee & Javed Iqbal & Muhammad Muzammil, 2017. "Pakistan-EU Commodity Trade: Is there Evidence of J-Curve Effect?," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 17(2), pages 1-8, June.
    6. Tri WIDODO, 2009. "Comparative Advantage: Theory, Empirical Measures And Case Studies," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 4, pages 57-82, November.
    7. Sergey Savchenko & Olena Sukach, 2020. "Home Bias and European Integration," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 60-78.
    8. Azam Chaudhry, 2011. "Tariffs, Trade and Economic Growth in a Institutionals Quality," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 31-54, Jul-Dec.
    9. Archi Bhatia & Hans Raj Sharma, 2019. "Financial liberalization and channels of growth: a comparative study of developed and emerging economies," Indian Economic Review, Springer, vol. 54(1), pages 81-119, June.
    10. Allan Webster & Philip Hardwick, 2005. "International trade in financial services," The Service Industries Journal, Taylor & Francis Journals, vol. 25(6), pages 721-746, September.
    11. M. Shahid Alam, 2016. "Commodities in Economics: Loving or Hating Complexity," Economic Thought, World Economics Association, vol. 5(1), pages 1-1, March.
    12. Muhammad Shahbaz & Amatul Razzaq Chaudhary & Syed Jawad Hussain Shahzad, 2020. "Is energy consumption sensitive to foreign capital inflows and currency devaluation in Pakistan?," Applied Economics, Taylor & Francis Journals, vol. 50(52), pages 5641-5658, June.
    13. Yvonne Wolfmayr, 2000. "Economic Integration, Specialisation and the Location of Industries. A Survey of the Theoretical Literature," Austrian Economic Quarterly, WIFO, vol. 5(2), pages 73-80, May.
    14. repec:ehl:lserod:117900 is not listed on IDEAS
    15. Toraubally, Waseem A., 2022. "Strategic trading and Ricardian comparative advantage," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 428-447.
    16. Iyigun, Murat & Rubin, Jared & Seror, Avner, 2021. "A theory of cultural revivals," European Economic Review, Elsevier, vol. 135(C).
    17. Naima Mubeen & Dr. Muhammad Abdul Quddus, 2023. "Trade Horizons: A Comprehensive Study of Determinants Shaping Export Diversification in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(3), pages 446-458.
    18. Schimmelpfennig, Axel, 1999. "Whodunnit? Changes in the relative demand for unskilled and skilled labor," Kiel Working Papers 914, Kiel Institute for the World Economy (IfW Kiel).
    19. Gulzar Ali & Zhaohua Li, 2017. "An Empirical Investigation on the Role of exports, imports and its Determinants in Foreign Trade of Pakistan," Information Management and Business Review, AMH International, vol. 8(6), pages 39-58.
    20. Landesmann, Michael A, 2022. "Luigi Pasinetti on growth and structural change in international economic relations," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 556-564.
    21. Sadia Bader, 2006. "Determining Import Intensity of Exports for Pakistan," SBP Working Paper Series 15, State Bank of Pakistan, Research Department.

    More about this item

    Keywords

    Exports; Textiles; VAR; Pakistan;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

    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:eee:ecmode:v:32:y:2013:i:c:p:302-315. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    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.