Intra Industry Trade, Fiscal Policy and Terms of Trade of Pakistan: A Long Run Analysis Using ARDL Technique

Pakistan Journal of Humanities and Social Sciences (PJHSS), Jan-June 2016, Volume 4, No. 1, Pages 1-16

16 Pages Posted: 2 Dec 2015

See all articles by Dr. Furrukh Bashir

Dr. Furrukh Bashir

University of the Punjab (PU) - Department of Economics; The Islamia University of Bahawalpur, Pakistan

Fareeha Andleeb

The Islamia University of Bahawalpur, Pakistan

Rahat Fatima

The Islamia University of Bahawalpur, Pakistan

Date Written: December 1, 2015

Abstract

This study investigates long run relationship between Intra Industry Trade, fiscal policy and Terms of Trade of Pakistan. Considering the intention, time series data having time span from 1972 to 2014 is chosen. Data is collected through various sources like World Development Indicators, Handbook of Statistics on Pakistan Economy (2010) and Economic Survey of Pakistan (2014-15). After observing mixed stationary results of the variables [I(0), I(1)] using Augmented Dickey Fuller test, autoregressive and distributed lag model technique is applied for the analysis. For estimating elasticities of terms of trade with respect to the variables, log-log form of the model is utilized. The study reveals Intra Industry Trade, Real Gross Capital Formation and Real Government Expenditure as significant causes of improving Terms of Trade of Pakistan. On the other side, Terms of Trade of Pakistan is deteriorated due to real Gross Domestic Product and Real Foreign Direct Investment.

Keywords: Intra Industry Trade, Real gross domestic product, real foreign direct investment, real government expenditure, Real Gross Capital Formation, Autoregressive and Distributed Lag Model

JEL Classification: C12, C22, C87, D24, L16, L66, O23, Z38

Suggested Citation

Bashir, Furrukh and Andleeb, Fareeha and Fatima, Rahat, Intra Industry Trade, Fiscal Policy and Terms of Trade of Pakistan: A Long Run Analysis Using ARDL Technique (December 1, 2015). Pakistan Journal of Humanities and Social Sciences (PJHSS), Jan-June 2016, Volume 4, No. 1, Pages 1-16. Available at SSRN: https://ssrn.com/abstract=2697551 or http://dx.doi.org/10.2139/ssrn.2697551

Furrukh Bashir (Contact Author)

University of the Punjab (PU) - Department of Economics ( email )

Lahore
Pakistan

The Islamia University of Bahawalpur, Pakistan ( email )

Bahawalpur, Punjab 63100
Pakistan

Fareeha Andleeb

The Islamia University of Bahawalpur, Pakistan ( email )

Bahawalpur, Punjab 63100
Pakistan

Rahat Fatima

The Islamia University of Bahawalpur, Pakistan ( email )

Bahawalpur, Punjab 63100
Pakistan

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