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Financial Sector Reforms and International Trade Competitiveness: A Case Study of Pakistan

Author

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  • Hanif, M.N.
  • Husain, F.
  • Jafri, S.

Abstract

This paper explores the relationship between financial development and international trade competitiveness in the case of Pakistan. An earlier study on this issue, Hanif and Jafri (2008), has some empirical limitations as it is based on Engle-Granger (1987) two steps procedure while dealing with multiple variables regressions. In this study we have used ARDL model by Pesaran, Shin and Smith (1999). We have also applied Johansen test for cointegration and checked the robustness of results established by the ARDL model. We have estimated the cointegration vector using Stock and Watson (1993) dynamic OLS method. We find a stable long run positive relationship between international trade competitiveness of Pakistan and its financial sector development. The estimated external finance elasticity of international trade competitiveness of textile sector in Pakistan is found to be 0.26 which is significantly higher than 0.17 estimated by Hanif and Jafri (2008).

Suggested Citation

  • Hanif, M.N. & Husain, F. & Jafri, S., 2008. "Financial Sector Reforms and International Trade Competitiveness: A Case Study of Pakistan," MPRA Paper 36730, University Library of Munich, Germany, revised 31 Jan 2012.
    • Handle: RePEc:pra:mprapa:36730
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    References listed on IDEAS

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    5. Muhammad Nadim Hanif & Sabina Khurram Jafri, 2008. "Financial Development and Textile Sector Competitiveness," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 9(1), pages 141-158, June.
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    7. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-1.
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    More about this item

    Keywords

    Financial Development; Competitiveness;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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