Analyzing the Role of Trade Openness in Economic Growth of Pakistan
Keywords:Trade Openness, Economic Growth of Pakistan, ARDL Approach
Trade openness is a vivid indicator of emerging economies & one of the most important determinants of growth. Therefore, quite a number of researchers have endeavored to analyze the significance & impact of trade openness on economic growth for various economies. Generally, the theoretical framework supports the constructive & positive impact of economic openness of a country for its overall economic development; however, there are mixed outcomes of empirical findings, especially for developing countries that experience fluctuations in their economic growth rate. This research work has employed trade to GDP ratio as a proxy variable for trade openness to examine its effect on the growth of Pakistan. The finding of this study does not reveal any considerable effect of trade liberalization during 1972-2016 on the growth of the Pakistan economy. The study concludes its premise based on empirical results that those economies that have a comparative advantage in trade with significant competitiveness usually benefit from liberalization, export promoting, and diversifying policies. The trading partners of Pakistan were and are mostly Western countries that have the comparative advantage of trade over Pakistan. Therefore, the government of Pakistan needs to promote & diversify its exports to those countries in which Pakistan has a comparative advantage in the international market.
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