Muhammad Zakaria

Economic Growth in Pakistan in the Era of Trade Liberalization: an Econometric Analysis Muhammad Zakaria

The book studies the effects of trade liberalization on economic growth in Pakistan through various channel variables. For this purpose a trade policy openness index is constructed. The results indicate that there are ten broad pathways through which trade liberalization has an indirect effect on economic growth. Trade liberalization positively affects growth through its impact on physical capital, human capital, foreign investment, inflation, real exchange rate, foreign debt, corruption and foreign exchange market distortions, while it negatively affects growth through government consumption and democracy. The results also indicate that the positive effects dominate the negative ones, thereby delivering the overall positive effect of trade liberalization on economic growth. This effect is economically reasonable and statistically significant. This result is robust to alternative estimation techniques, equation specifications and inclusion of some other channel variables.