EXTERNAL DEBT AND EXPORT PERFORMANCE IN PAKISTAN: AN EMPIRICAL INVESTIGATION
Download| Volume 13 Issue 2 2017 | |
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| Author(s): |
Muhammad Asif Shamim
Syed Tehseen Jawaid
Madiha Kamal
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| Abstract | The objective of this research is to study the relationships between the two variables, external debt and export performance within the reach of Pakistan. The data used for the study was selected by annual time series from 1972 to 2014. According to the co-integration analysis done for the study, there was a significant negative relationship between export performance and external debt in Pakistan. Whereas when the Error correction model was used, the results pointed out an inconsequential relationship in the short run within the two variables, external debt, and exports in the short run. The next test of stability analysis confirms that the long-run model is stable whereas, the granger causality test claims a unidirectional relationship between external debt and exports; the result of impulse response also confirms the negative relationship between exports and external debt in Pakistan; further the result of FMOLS states that the initial results are vigorous; the major reasons for the negative link between the two variables exports and external debt is the IMF conditionality to Pakistan that it has to raise revenue by increasing indirect taxes and increasing energy prices. It is suggested that dependency on external debt should be discouraged and this gap of foreign inflow should be covered with foreign direct investment and inflows of workers‘ remittances and by increasing export earnings in the country. The government should improve the regional trade agreement and should avail the opportunity of GSP plus (Generalized Scheme of Preferences) status by improving the law and order situation. It is also suggested that government should control the failure of the power supply and export allowances should be given to the Export Processing Zones. These are the earliest measure that should be taken to minimize the negative effects of external debt on export performance in the country. |
| Keywords | Export, External Debt, Pakistan, Time Series Analysis. |
| Year | 2017 |
| Volume | 13 |
| Issue | 2 |
| Type | Short Report |
| Recognized by | Higher Education Commission of Pakistan, HEC | Category | "Y" | Journal Name | IBT Journal of Business Studies | Publisher Name | ILMA University | Jel Classification | C62, C68,C69 | DOI | http://dx.doi.org/10.46745/ilma.jbs.2017.13.02.03 | ISSN no (E, Electronic) | 2409-6520 | ISSN no (P, Print) | 2416-8393 | Country | Pakistan | City | Karachi | Institution Type | University | Journal Type | Open Access | Type of Review | Double Blind Peer Reviewed | Format | Paper Link | http://ibtjbs.ilmauniversity.edu.pk/journal/jbs/13.2/3.pdf | Page | 22-35 | Reference | Atique, R., & Malik, K. (2012). Impact of domestic and external debt on the economic growth of Pakistan. World Applied Sciences Journal, 20(1), 120-129. Ali, R., & Mustafa, U. (2012). External debt accumulation and its impact on economic growth in Pakistan. The Pakistan Development Review, 79-95. Abdullahi, Y. Z., Aliero, H. M., &Abdullahi, M. (2013). Analysis of the Relationship between External Debt and Economic Growth in Nigeria. Interdisciplinary Review of Economics and Management, 3(1), 1-11. Ali, Sharafat (2014). Foreign Capital Flows and Economic Growth in Pakistan: An Empirical Analysis. World Applied Sciences Journal, 29(2), 193-201. Ahmed, Q. M., Butt, M. S., Alam, S., &Kazmi, A. A. (2000). Economic Growth, Export, and External Debt Causality: The Case of Asian Countries [with Comments]. The Pakistan Development Review, 591-608. Afzal, M., urRehman, H., &urRehman, J. (2008). Causal nexus between economic growth, export and external debt servicing: The case of Pakistan. Retrieved December, 14, 2009. Ali, Sharafat (2014). Foreign Capital Flows and Economic Growth in Pakistan: An Empirical Analysis. World Applied Sciences Journal, 29(2), 193-201.. AminuUmaru, A. A. (2013). External Debt and Domestic Debt Impact on the Growth of the Nigerian Economy .External Debt and Domestic Debt Impact on the Growth of the Nigerian Economy , 1-16. Checherita-Westphal, C., &Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European Economic Review, 56(7), 1392-1405. Dritsaki, Chaido. "Causal nexus between economic growth, exports and government debt: the case of Greece." Procedia Economics and Finance 5 (2013): 251-259. Gohar, M., Bhutto, Ν. A., & Butt, F. (2012). The Impact of External Debt Servicing on the growth of Low-Income Countries, Sukkur Institute of Business Administration. In Proceedings of 2nd International Conference on Business Management (ISBN: 978969-9368-06-6). Gersovitz, 1981, "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Vol. 48, pp. 289-309. Kasidi, F., & Said, A. M. (2013). Impact of external debt on economic growth: A case study of Tanzania. Advances in Management and Applied Economics, 3(4), 59. Karagol, E. (2002). The causality analysis of external debt service and GNP: The case of Turkey. Central Bank Review, 1(2), 39-64. Kızılgöl, Ö. A., &İpek, E.(2012) An Empirical Evaluation of the Relationship between Trade Openness and External Debt: Turkish Case. Muhammad Afzal Lecturer, H. u. (2008, december). causal nexus between economic growth, export and external debt servicing the case of pakistan. causal nexus between economic growth, export and external debt servicing the case of pakistan , 1-15. Panizza, U. (2008, March). Domestic and external public debt in developing countries. In United Nations Conference on Trade and Development Discussion Paper (No. 188). QaziMasood Ahmed, M. S. (2000). Economic Growth, Export, and External Debt Causality: The Case of Asian Countries .Economic Growth, Export, and External Debt Causality: The Case of Asian Countries , pp. 1-18. Saad, Wadad. "Causality between economic growth, export, and external debt servicing: the case of Lebanon." International Journal of Economics and Finance 4.11 (2012): 134. Schclarek, A. (2004). Debt and Economic Growth in Developing and Industrial Countries. Debt and Economic Growth in Developing and Industrial Countries , 1-39. Shabbir, S. (2008). Does External Debt Affect Economic Growth: Evidence from Developing Countries .Does External Debt Affect Economic Growth: Evidence from Developing Countries , pp. 1-26. Zafar, M., Sabri, P. S. U., Ilyas, M., &Kousar, S. (2015). the impact of trade openness and external debt on economic growth: new evidence from south asia, east asia and middle east. science international, 27(1). |