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Trade Openness and Growth: An Analysis of Transmission Mechanism in Pakistan

Author

Listed:
  • Siddiqui, Aamir Hussain
  • Iqbal, Javed

Abstract

This paper investigates the linkages between trade policy openness and economic growth for Pakistan for the period 1973 to 2008. The paper tests the hypothesis that trade policy does not affect economic growth directly rather it affects through some growth determining economic variables, which then effect economic growth. For this purpose a simultaneous system of equations is estimated through the Three Stage Least Squares. The results suggest a positive impact of trade policy openness on Black Market Premium, Domestic Investment and Foreign Direct Investment (FDI) and negative impact on Macro Policy Index. However, Black Market Premium and FDI show negative and Domestic Investment shows positive impact on economic growth.

Suggested Citation

  • Siddiqui, Aamir Hussain & Iqbal, Javed, 2010. "Trade Openness and Growth: An Analysis of Transmission Mechanism in Pakistan," MPRA Paper 24534, University Library of Munich, Germany, revised 20 Aug 2010.
    • Handle: RePEc:pra:mprapa:24534
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    References listed on IDEAS

    as
    1. Romain Wacziarg, 2001. "Measuring the Dynamic Gains from Trade," The World Bank Economic Review, World Bank, vol. 15(3), pages 393-39-429.
    2. Siddiqui, Amir Hussain & Iqbal, Javed, 2005. "Impact of trade openness on output growth for Pakistan: an empirical investigation," MPRA Paper 23757, University Library of Munich, Germany.
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    More about this item

    Keywords

    Openness; Growth; Transmission Mechanism; Pakistan;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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