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Import Demand Income Elasticity and Growth Rate in Pakistan

Author

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  • Saleem Khan
  • Muhammad Azam
  • Chandra Emirullah

Abstract

This article applies the import demand function and constrained growth model in case of Pakistan and investigates for the impact of trade liberalization using data for the period of 1981–2010. The autoregressive distributed lag method and rolling regression analysis are employed to estimate import demand income elasticity. In results, the imports are found to be highly sensitive to the changes in income level. In addition, a trend of gradual increase in income elasticity of imports has been found since the aftermath of trade liberalization. However, no evidence has been found that indicates that the growth rate is increased as a consequence of liberalization. The liberalization has not increased export growth in association with the rising growth in import demand income elasticity. Thus, it is concluded that liberalization has increased the external constraint over economic growth.

Suggested Citation

  • Saleem Khan & Muhammad Azam & Chandra Emirullah, 2016. "Import Demand Income Elasticity and Growth Rate in Pakistan," Foreign Trade Review, , vol. 51(3), pages 201-212, August.
    • Handle: RePEc:sae:fortra:v:51:y:2016:i:3:p:201-212
    DOI: 10.1177/0015732516646208
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    Cited by:

    1. Hafsa Hina, 2020. "Correction of Trade Deficit through Depreciation - A Misdirected Policy: An Empirical Evidence from Pakistan," PIDE-Working Papers 2020:24, Pakistan Institute of Development Economics.
    2. Mahmood, Asif & Zahoor, Muhammad Awais, 2021. "Role of Global Value Chains and Exchange Rate: An Empirical Examination in case of Pakistan," MPRA Paper 115958, University Library of Munich, Germany.
    3. Moazam Mahmood & Shamyla Chaudry, 2020. "Pakistan’s Balance-of-Payments Crisis and Some Policy Options," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 25(2), pages 55-92, July-Dec.
    4. Hafsa Hina, 2021. "What Do We Know of Trade Elasticities?," PIDE Knowledge Brief 2021:30, Pakistan Institute of Development Economics.

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    More about this item

    Keywords

    Import demand; Thirlwall’s model; trade liberalization; time series; Pakistan;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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