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Constraints to the Economic Growth of Pakistan: A Three-gap Approach

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  • Zafar Iqbal

    (Graduate School in Economics, Tilburg University, The Netherlands.)

Abstract

The development of the two-gap model [Chenery and Bruno (1962); Chenery and Strout (1966); Mckinnon (1964); and Weisskopf (1972)] was an important contribution to the literature of economic development. The two-gap model deals with the interactions between the savings constraint and the foreign exchange constraint in the determination of economic growth in an economy. The savings constraint refers to the situation when the growth of an economy is limited by the availability of domestic savings for investment, and the foreign exchange constraint refers to the growth of an economy being limited by the availability of foreign exchange for importing capital goods. More recently, there has been increasing interest in the three-gap model, introducing fiscal constraint as a third gap limiting the growth prospects of highly indebted developing economies [Bacha (1990); Solimano (1990) and Taylor (1993, 1994)]. The fiscal constraint is intended to reflect the impact of the availability of resources to finance the public investment required to support a given level of potential output. These constraints are selected for analysis because of their direct impact on economic growth of Pakistan.

Suggested Citation

  • Zafar Iqbal, 1995. "Constraints to the Economic Growth of Pakistan: A Three-gap Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 1119-1133.
    • Handle: RePEc:pid:journl:v:34:y:1995:i:4:p:1119-1133
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    Cited by:

    1. Rabia Butt & Attiya Yasmin Javid, 2013. "Foreign Aid and the Fiscal Behaviour of Government of Pakistan," PIDE-Working Papers 2013:96, Pakistan Institute of Development Economics.
    2. Thilak Ranaweera, 2004. "Ghost of the financing gap: an overlooked aspect of the aid debate," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(4), pages 637-652.
    3. Worrell, DeLisle & Lowe, Shane & Naitram, Simon, 2012. "Growth Forecasts for Foreign Exchange Constrained Economies," MPRA Paper 52169, University Library of Munich, Germany.
    4. Rashid Amjad, 2014. "Pakistan’s Growth Spurts and Reversals: A Historical Perspective," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(Special E), pages 91-104, September.
    5. Farzana Shaheen & Azad Haider & Sajid Amin Javed, 2011. "Estimating Pakistan's Time Varying Non-Accelerating Inflation Rate of Unemployment: An Unobserved Component Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 1(4), pages 172-179.
    6. Shirin Akter, 2018. "Do remittances and foreign aid augment the gross savings: Bangladesh, India and Philippines perspective?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(4), pages 449-463, December.
    7. Zafar Iqbal & Ghulam Mustafa Zahid, 1998. "Macroeconomic Determinants of Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(2), pages 125-148.
    8. Zafar Iqbal, 1997. "Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(2), pages 115-129.
    9. Shahid Ali & Naved Ahmad, 2010. "The Effects of Fiscal Policy on Economic Growth: Empirical Evidences Based on Time Series Data from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 497-512.

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