No abstract

Given the importance of international trade and export performance in economic growth, this study attempts to examine the determinants of exports of Pakistan, using a time series data over the period 1975-2008. A simultaneous equation approach is followed and the demand and supply side equations are specified with appropriate variables. This is a country-wise disaggregated analysis of Pakistan versus its trade partners and the estimation strategy is based on two approaches. First we employ the Generalised Methods of Moments (GMM), which is followed by the Empirical Bayesian technique to get consistent estimates. The GMM technique is believed to be efficient for time series data provided the sample size is sufficiently large. In case of small samples, the estimates might not be precise and might appear with unbelievable sign and insignificant magnitudes. To avoid the sample bias and other problems, we employ the Empirical Bayesian technique which provides much precise estimates. The factual results obtained via the GMM technique are a little bit mixed, although most of the coefficients are found to be statistically significant and carry their expected signs. In order to compare and validate these results, the Empirical Bayesian technique is employed. This offers considerable improvement over the previous results and all the variables are found to be highly significant with correct sign across the countries concerned with the exception of a few cases. The price and income elasticities in both the demand and supply side equations carry their expected signs and significant magnitudes for the trading partners. The findings suggest that exports of Pakistan are much sensitive to changes in the world demand and world prices. This establishes the importance of demand side factors like world GDP, Real exchange rate, and world prices to determine the exports of Pakistan. On the supply side, we find relatively small price and income elasiticities. The results reveal that demand for exports is relatively higher for countries in NAFTA, European Union and Middle East regions. The study recommends particular concentration on the trade partners in these regions to improve the export performance of Pakistan. Keywords: Exports, GMM, Empirical Bayesian Method, Pakistan

As regional integration has proliferated in most parts of the world, so developing economies across the globe have made it a leading policy instrument to integrate their economies with the global markets and rest of the world through the instrument of trade liberalization. This has led to the establishment of various mega global integrations. Regional Comprehensive Economic Partnership (RCEP) is an example of these global integrations. Currently Pakistan is not part of RCEP, which is likely to be adversely affected due to the expected trade diversion. This paper investigates the possible adverse impact of RCEP on households’ income and real factors’ returns in Pakistan using the MyGTAP model in the global Computable General Equilibrium (CGE) model framework. The results of simulation intimate that the overall impact of RCEP on the economy of Pakistan (as outsider) is negative. There is an overall decrease in real income of all types of households and factors’ returns. Khyber Pakhtunkhwa and Baluchistan may reveal the largest decrease in households’ income. The possible decrease in income may be higher for urban households and non-farm rural households as compared to farmers and farm workers. Additionally, Pakistan is adversely impacted in terms decrease in real GDP, real exports, and imports and also decrease in most of the sectorial exports, sectorial imports and sectoral output. Keeping in view the research findings, this study suggests to the government to undertake remedial measures in advance to avoid the possible adverse impact of RCEP on the economy of Pakistan.