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Trade plays a vital role in determining the growth process of any country. Trade liberalisation and openness of the economy are now almost universally accepted as the main ingredients of successful economic growth and welfare of the... more
Trade plays a vital role in determining the growth process of any country. Trade liberalisation and openness of the economy are now almost universally accepted as the main ingredients of successful economic growth and welfare of the population. These are believed to be responsible for the exceptional growth of industrialised and newly industrialised countries. Many developing countries, under the auspices of the WTO are taking major steps to liberalise their trade regimes. However, in the short run, the impact of these policy changes is generally perceived to be painful for both the producers and the consumers; and especially so for the latter. A key question here is the impact of trade reforms on poverty, which has persisted in most developing countries despite concerted efforts on many fronts to eradicate this social evil. Like many developing countries, Pakistan has undertaken far-reaching trade reforms aimed at creating an open international trading environment. Pakistan’s depen...
Research Interests: Economics, Development Economics, International Economics, Poverty, International Trade, and 13 moreEconomic Growth, Applied Economics, Free Trade, Policy Change, Developing Country, Trade Policy, Poverty Alleviation, Openness to experience, Trade Reform, Liberalization, Pakistan Development, Trade Liberalisation, and Growth Process
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PAKISTAN INSTITUTE OF DEVELOPMENT ECONOMICS ISLAMABAD
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Economic Growth: A Case Study of Pakistan
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A debt sustainability issue is important when government do not follow any fiscal cliff and interest payments are consuming significant part of the resources. This thesis calculates sufficient condition of debt sustainability in Pakistan.... more
A debt sustainability issue is important when government do not follow any fiscal cliff and interest payments are consuming significant part of the resources. This thesis calculates sufficient condition of debt sustainability in Pakistan. It uses simple textbook methodology of government budget constraint, accounting approach to measure sustainability of debt. We have checked the extent of nominal as well as real GDP growth required to main the debt-GDP ratio level at 60 percent, 50 percent and 40 percent with level of fiscal deficit 5 percent, 4.5 percent, 4 percent, 3.5 percent and 3 percent. Thesis concludes that lower the fiscal deficit higher possibility of maintaining the debt at its sustainable level. Moreover, lower the fiscal deficit higher will be the chances to finance development expenditures as well redistribute the impact of growth. Moreover, it is also examined that maintaining debt-GDP ratio at certain level implies that we do not need to retire debt further and grow...
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The paper finds that an increase in money supply over the long-run results in a higher rate of inflation and thus provides support for the quantity theory of money. It establishes that inflation is essentially a monetary phenomenon.... more
The paper finds that an increase in money supply over the long-run results in a higher rate of inflation and thus provides support for the quantity theory of money. It establishes that inflation is essentially a monetary phenomenon. However, the money supply does not instantly influence the price levels; the impact of money supply on inflation has a considerable lag of about 9 months. While the study shows that the money supply works through the system in less than a year, it also points out that the system takes rather long to converge to equilibrium if shocks appear in any of the three variables, viz., GDP, money supply, and prices.
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The study is an attempt to reveal a link between foreign aid and educational projects in the last one and a half decade. This study used nonlinear model by adding square term of foreign aid to capture the nonlinear association with the... more
The study is an attempt to reveal a link between foreign aid and educational projects in the last one and a half decade. This study used nonlinear model by adding square term of foreign aid to capture the nonlinear association with the primary enrolment, secondary enrolment and higher enrolment. Nevertheless the linear model is also estimated and in the all the three models the results are same that foreign aid in the three sectors does not affect enrolment rate. The study concludes that foreign aid could be effective in increasing primary enrolment but not secondary or higher enrolment.
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The variations in exchange rate play a vital role in the determination of trade balance. Volatile exchange rate shatters the investor’s and trader’s confidence, and slows down the process of trade, which results in slower growth. In this... more
The variations in exchange rate play a vital role in the determination of trade balance. Volatile exchange rate shatters the investor’s and trader’s confidence, and slows down the process of trade, which results in slower growth. In this paper, other market instabilities—such as GDP growth instability in imports equation and agriculture and manufacturing instability in exports equation—have been used with exchange rate instability, and GARCH variance is used to measure it. It is found that the impact of exchange rate instability on exports is positive but insignificant, while the impact on imports is negative and significant.
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Using Computable General Equilibrium Model, this paper assesses the impact of import liberalisation on macro aggregates and on the welfare of households. It uses benchmark data from Social Accounting Matrix for the year 1989-90 and... more
Using Computable General Equilibrium Model, this paper assesses the impact of import liberalisation on macro aggregates and on the welfare of households. It uses benchmark data from Social Accounting Matrix for the year 1989-90 and simulates the impact of (i) removal of quota restrictions on imports of electric and non-electric equipment and transport equipment, (ii) reduction in import tariffs, and (iii) reduction in quota and tariff restriction in the presence of economic growth. The results of these simulation exercises indicate that reduction in quantitative restrictions on imports improves welfare of employees’ group of households in the urban areas. Welfare gain is the highest for the poorest group of households in the rural areas. Similarly, tariff reduction benefits employees more and (in the rural areas) than it does the medium-size landholders.
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The study attempted to investigate the determinants of inflation in case of Pakistan and to check the validity of monetarist stance that inflation is always and everywhere a monetary phenomenon by investigating the impact of oil prices,... more
The study attempted to investigate the determinants of inflation in case of Pakistan and to check the validity of monetarist stance that inflation is always and everywhere a monetary phenomenon by investigating the impact of oil prices, M2 and GDP on prices. The descriptive analysis shows there is strong correlation between money supply and prices and also between GDP and prices while the correlation between oil prices and CPI is (0.60) less as compare to other variables. The important finding of the paper is that oil prices have short run impact on inflation whereas money supply is the long run determinant of inflation in case of Pakistan.
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This paper is an attempt to get fresh estimates of the underground economy and tax evasion in Pakistan. Various methodologies have been used to measure the size of the underground economy, i.e., the monetary, fiscal, and labour market... more
This paper is an attempt to get fresh estimates of the underground economy and tax evasion in Pakistan. Various methodologies have been used to measure the size of the underground economy, i.e., the monetary, fiscal, and labour market approaches in particular. The monetary approach has strong assumptions but this is the best, easiest, and the most appropriate approach for estimation. The year 1973 has been chosen as the benchmark period, because the pre-1973 data on money supply is not reliable. The results obtained in the study show that the underground economy and tax evasion as a percentage of GDP have increased by 1.83 times in the last 29 years. These were the maximum in 1998 but after that, due to low level of economic activity, there was a decline. This shows that there is a strong relationship with the formal economy. The underground economy and tax evasion increased sharply from 1991 to 1998, and then declined till 2002. Between 1991 and 1998, the rate of increase in the un...
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Rise in the underground economy creates problems for the policy-makers to formulate economic policies, especially the monetary and fiscal policies. It is found that if there was no tax evasion, budgets balance might have been zero and... more
Rise in the underground economy creates problems for the policy-makers to formulate economic policies, especially the monetary and fiscal policies. It is found that if there was no tax evasion, budgets balance might have been zero and positive for some years and we would not have needed to borrow as much as we had borrowed. It is concluded that the impact of the underground economy is significant to the movements of the formal economy, but the impact of formal economy is insignificant in explaining the movements in the underground economy. In the long run, underground economy and official economy are positively associated. It is estimated that the underground economy ranges between Rs 2.91 trillion and Rs 3.34 trillion (54.6 percent of GDP to 62.8 percent of GDP respectively) in 2005 and tax evasion ranges between Rs 302 billion and Rs 347 billion (5.7 percent of GDP to 6.5 percent of GDP respectively) in 2005. Underground economy and tax evasion were increasing very rapidly in the ...
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Property rights are the core of economic development. Property rights are essential for the people to believe in the market system. The paper discusses importance of property rights, problems in the property rights in Pakistan,... more
Property rights are the core of economic development. Property rights are essential for the people to believe in the market system. The paper discusses importance of property rights, problems in the property rights in Pakistan, possibility of designing property rights in Pakistan and its impact on corruption. The study concludes that there are lots of anomalies in the current property rights law which needs to be abolished such as benami transaction and general power of attorney. The study prefers Parcel (Torrens) based system because it is generally known to the people and the rules will be formed by taking informal constraints into consideration. Titling and registration of property rights in a formal way, coherent with informal constraints, would definitely increase corruption in the short, i.e., in the period of transition. But in the long run when the system is setup we can hope that the extent of corruption will decrease.
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There are various factors that affect movements of the stock market. Month to month variations in stock market can be studied using several fundamentals such as interest rate, prices, exchange rate etc. However, daily movements can only... more
There are various factors that affect movements of the stock market. Month to month variations in stock market can be studied using several fundamentals such as interest rate, prices, exchange rate etc. However, daily movements can only be determined by different signals or news/events. This study analyzes the effect of daily movements in KSE-100 Index due to different policies announced as well as incidents/events happened in the country. Therefore daily data is collected on the movements in stock market and reason for major change in that day from the Sunday edition of the Daily Newspaper “The News”, It is concluded that global news and political new can effect stock market index ferociously. Investment in Blue chips is a safe haven for the investors. It is not the determinant of KSE index, instead it is the outcome of the movements in KSE index. Moreover, panic attack is always higher than the herd behaviour as far as day to day transactions are concerned. Investors react quickly...
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Over the years there has been some growth in the demand for petroleum products by transport sector despite increases in prices of various petroleum components. This growth can, in part, be attributed to (a) increase in per capita income,... more
Over the years there has been some growth in the demand for petroleum products by transport sector despite increases in prices of various petroleum components. This growth can, in part, be attributed to (a) increase in per capita income, and (b) consumer preference for convenient fuel. Notwithstanding the increase in petroleum demand due to natural increase in base, there has been a tendency of inter-fuel substitution due to manifold increase in gasoline prices and the option and availability of alternative fuel in transport sector. Thus, the conversion of vehicles initially to diesel fuel and now to CNG is a common phenomenon. Within this perspective the objectives of the study are a) to identify the factors that influence gasoline demand, b) to measure the possibility of inter-fuel substitution and the resulting consequences for petrol demand and c) generate alternative demand scenarios to overcome the existing excess supply. Simulation exercise is done to check that what happened...
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The primary objective of this paper is to find whether fiscal consolidation has positive impact on economic growth in Pakistan or not, using nonlinear specification. In addition to checking nonlinear relationship between fiscal deficit... more
The primary objective of this paper is to find whether fiscal consolidation has positive impact on economic growth in Pakistan or not, using nonlinear specification. In addition to checking nonlinear relationship between fiscal deficit and economic growth, we also compute optimal level of fiscal deficit that enhances growth, using data from 1976 to 2015. The results show that at the current level, fiscal deficit is positively associated with economic growth but fiscal deficit at a very high level would be damaging for growth. The nonlinear association between fiscal deficit and economic growth suggests that Pakistan would need to keep fiscal deficit in check and keep on practicing fiscal prudence. The analysis of data reveals that although the fiscal deficit has come down over the years, capital, or development, expenditures have also come down. According to the calculations in this paper, the optimal level of fiscal deficit is 0.74 percent of GDP, implying that Pakistan’s expenditu...
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Why Capitalism? is written in response to the popular belief of “end of capitalism” that emerged in the aftermath of the 2008 financial crisis. In this book, the author criticises the anti-capitalism claim advocated by numerous writers... more
Why Capitalism? is written in response to the popular belief of “end of capitalism” that emerged in the aftermath of the 2008 financial crisis. In this book, the author criticises the anti-capitalism claim advocated by numerous writers who welcomed regulated markets and essential government intervention at the time of recession to fix the problems, which free markets cannot resolve by itself. While praising capitalism, the author argues that the success of capitalist system was inevitable over the last half decade in most of the countries. He believes that democracy along with capitalism is the best system since people, by their voting rights, choose their own tax rates and way of redistribution of wealth. Furthermore, according to him it is the only system, which faced many challenges, but not only survived but came out stronger and dominated the world. Theoretically, the author’s arguments, in this book are very attractive but in practice give rise to several questions.
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Throughout Pakistans history, policy has sought to promote exports through government support and incentives. The government machinery is geared to export promotion especially through direct and indirect subsidies. Surprisingly, these... more
Throughout Pakistans history, policy has sought to promote exports through government support and incentives. The government machinery is geared to export promotion especially through direct and indirect subsidies. Surprisingly, these policies have been continued without serious examination. This paper makes a first attempt to evaluate these policies by estimating the impact of two such schemesexport financing and rebate/refund schemeson export
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History of the State Bank of Pakistan is a series beginning with two volumes published first in 1992 and 1994. The former covered the 1948–60 period and the latter the years from 1961 to 77. M. Ashraf Janjua then wrote the next two... more
History of the State Bank of Pakistan is a series beginning with two volumes published first in 1992 and 1994. The former covered the 1948–60 period and the latter the years from 1961 to 77. M. Ashraf Janjua then wrote the next two volumes covering the years 1977–88 and 1988–2003. The third volume, pertaining to the years 1977–88, was reviewed by A. R. Kemal (PDR, 42:2, pp.161–166). That volume contains not only the major developments in the monetary and real sectors during the eleven-year period but also traces the developments since Independence.
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Throughout Pakistan’s history, policy has sought to promote exports through government support and incentives. The government machinery is geared to export promotion especially through direct and indirect subsidies. Surprisingly, these... more
Throughout Pakistan’s history, policy has sought to promote exports
through government support and incentives. The government machinery is
geared to export promotion especially through direct and indirect subsidies.
Surprisingly, these policies have been continued without serious examination.
This paper makes a first attempt to evaluate these policies by estimating the
impact of two such schemes—export financing and rebate/refund schemes—on
export performance. Our analysis shows that, over the long run, the export
financing scheme had a negative effect on exports while the rebate/refund
scheme affected exports insignificantly. Subsidy schemes clearly do not seem to
work, yet they have been retained for many years.
through government support and incentives. The government machinery is
geared to export promotion especially through direct and indirect subsidies.
Surprisingly, these policies have been continued without serious examination.
This paper makes a first attempt to evaluate these policies by estimating the
impact of two such schemes—export financing and rebate/refund schemes—on
export performance. Our analysis shows that, over the long run, the export
financing scheme had a negative effect on exports while the rebate/refund
scheme affected exports insignificantly. Subsidy schemes clearly do not seem to
work, yet they have been retained for many years.
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Rise in the underground economy creates problems for the policy-makers to formulate economic policies, especially the monetary and fiscal policies. It is found that if there was no tax evasion, budgets balance might have been zero and... more
Rise in the underground economy creates problems for the policy-makers to formulate economic policies, especially the monetary and fiscal policies. It is found that if there was no tax evasion, budgets balance might have been zero and positive for some years and we would not have needed to borrow as much as we had borrowed. It is concluded that the impact of the underground economy is significant to the movements of the formal economy, but the impact of formal economy is insignificant in explaining the movements in the underground economy. In the long run, underground economy and official economy are positively associated. It is estimated that the underground economy ranges between Rs 2.91 trillion and Rs 3.34 trillion (54.6 percent of GDP to 62.8 percent of GDP respectively) in 2005 and tax evasion ranges between Rs 302 billion and Rs 347 billion (5.7 percent of GDP to 6.5 percent of GDP respectively) in 2005. Underground economy and tax evasion were increasing very rapidly in the ...
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Controlling prices is one of the biggest tasks that macroeconomic policymakers face. The objective of this study is to analyze the demand- and supply-side factors that affect food prices in Pakistan. We analyze their long-run relationship... more
Controlling prices is one of the biggest tasks that macroeconomic policymakers face. The objective of this study is to analyze the demand- and supply-side factors that affect food prices in Pakistan. We analyze their long-run relationship using an autoregressive distributed lag model for the period 1970–2010. Our results indicate that that the most significant variable affecting food prices in both
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Using Computable General Equilibrium Model, this paper assesses the impact of import liberalisation on macro aggregates and on the welfare of households. It uses benchmark data from Social Accounting Matrix for the year 1989-90 and... more
Using Computable General Equilibrium Model, this paper assesses the impact of import liberalisation on macro aggregates and on the welfare of households. It uses benchmark data from Social Accounting Matrix for the year 1989-90 and simulates the impact of (i) removal of quota restrictions on imports of electric and non-electric equipment and transport equipment, (ii) reduction in import tariffs, and
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The exchange rate exerts a strong influence on a country’s trade. It is depicted from the high correlation between the real exchange rate and exports (0.90) and that between the real exchange rate and imports (0.88). In the present-day... more
The exchange rate exerts a strong influence on a country’s trade. It is depicted from the high correlation between the real exchange rate and exports (0.90) and that between the real exchange rate and imports (0.88). In the present-day scenario of falling levels of tariff and a reduced number of non-tariff barriers, the exchange rate has assumed a crucial role in influencing the trade deficit. Imports have a very significant association with exports as shown by the correlation between exports and imports (0.97). The increase in exports in the absence of surplus stocks requires an increase in production, which in turn requires capital and raw material. We analysed the long-run relationship and the short-run dynamics among the three variables. It is concluded that there exists a long-run relationship between real exchange rate, exports, and imports; and real exchange rate is negatively associated with the exports and positively associated with the imports. In the short-run, imports an...
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I. INTRODUCTION Exchange rate is a price of traded goods in the world market. To maintain the commodities competitive in the market, exchange rate should be adjusted according to the change in prices. If it is adjusted accordingly, then... more
I. INTRODUCTION Exchange rate is a price of traded goods in the world market. To maintain the commodities competitive in the market, exchange rate should be adjusted according to the change in prices. If it is adjusted accordingly, then we say that purchasing power parity ...
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303 Tarriff Reduction, Fiscal Adjustment and Poverty in Pakistan Tariff Reduction, Fiscal Adjustment and Poverty in Pakistan: A CGE-Based Analysis1 Abstract After more than four decades of protective trade policy, Pakistan undertook... more
303 Tarriff Reduction, Fiscal Adjustment and Poverty in Pakistan Tariff Reduction, Fiscal Adjustment and Poverty in Pakistan: A CGE-Based Analysis1 Abstract After more than four decades of protective trade policy, Pakistan undertook substantial trade liberalization beginning in the 1990s. ...
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The first-ever Pakistan Sustainable Development Goals’ (SDGs) Status report presents Pakistan’s progress on SDGs. Since the adoption of SDGs at the global level in 2015, this report presents Pakistan’s progress on SDGs indicators... more
The first-ever Pakistan Sustainable Development Goals’ (SDGs) Status report presents Pakistan’s progress on SDGs. Since the adoption of SDGs at the global level in 2015, this report presents Pakistan’s progress on SDGs indicators viz-a-viz their baseline values. This kind of monitoring and tracking is important for identifying and prioritising areas requiring policy support and resource allocation. The report not only captures the existing data availability gap by sources of data, but it also compares the baseline (2014- 2015), as far as available, values of available 133 SDG indicators with their corresponding available and latest values in 2020-21.