engleski

Is Export Led Hypothesis Valid in Pakistan? If so, how imprtant is export to Europe?

This paper investigates the validity of export-led growth hypothesis in Pakistan. We use time series data for the period of 1977-2012 to find the validity of export-led growth hypothesis in Pakistan. GDP per capita is treated as dependent variable and export as independent variable along with other explanatory variables i.e. FDI, exchange rate, infant mortality rate and inflation. Augmented Dickey Fuller (ADF) test is applied to check the stationary of variables. GDP, export, inflation, FDI and infant mortality rate get stationary at level but exchange rate were found non stationary at level and become stationary at first difference. Autoregressive distributed lag (ARDL) model was appropriate to find relationship as variables were integrated with different orders. Results of ARDL show that one percent increase in export will raise GDP by 1.11 percent in the long run and a 1% increase in export will raise GDP by 1.34 percent in short run. The coefficient of EC term is negative and highly significant which confirms the convergence of model from short run to long run. Therefore, export-led growth hypothesis is valid in case of Pakistan. In addition, the basis will be set for further research and policy suggestions regarding export to Europe.

Export - Led Growth, ARDL, Pakistan, Europe

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