Trade Liberalisation, Financial Development and Economic Growth

PIDE Working Paper No. 2007-19

41 Pages Posted: 17 May 2007

See all articles by Arshad

Arshad

Quaid-i-Azam University - Pakistan Institute of Development Economics (PIDE)

Abdul Qayyum

Date Written: 2007

Abstract

This paper empirically investigates the impact of trade and financial liberalisation on economic growth in Pakistan using annual observations over the period 1961-2005. The analysis is based on the bound testing approach of cointegration advanced by Pesaran, et al. (2001). The empirical findings suggest that both trade and financial policies play an important role in enhancing economic growth in Pakistan in the long-run. However, the short-run responses of the real deposit rate and trade policy variables are very low, suggesting further acceleration of the reform process. The feedback coefficient suggests a very slow rate of adjustment towards long-run equilibrium. The estimated equation remains stable over the period of study as indicated by CUSUM and CUSUMQ stability tests.

Keywords: Trade Liberalisation, Financial Development, Economic Growth, Bound Test, Pakistan

JEL Classification: F43, G10, O10, C22

Suggested Citation

Khan, Muhammad Arshad and Qayyum, Abdul, Trade Liberalisation, Financial Development and Economic Growth (2007). PIDE Working Paper No. 2007-19. Available at SSRN: https://ssrn.com/abstract=986244 or http://dx.doi.org/10.2139/ssrn.986244

Muhammad Arshad Khan (Contact Author)

Quaid-i-Azam University - Pakistan Institute of Development Economics (PIDE) ( email )

Quaid-i-Azam University Campus
P.O.Box 1091
Islamabad, Federal Capital 44000
Pakistan

No contact information is available for Abdul Qayyum

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