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Original scientific paper

Impact of Trade Liberalization on Trade Balance in Pakistan: Cointegration and Error Correction Mechanism

Bushra Yasmin ; Economics Department at Fatima Jinnah Women University, The Mall, Rawalpindi


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Abstract

This study traces out the way trade liberalization process affects the trade balance keeping
into view the stationary nature of data used. The cointegration techniques and the error correction
mechanism allow us to establish both, the short-run and the long-run relationship
among different measures of trade liberalization and trade balance. The fi ndings suggest
a signifi cant positive long-run relationship between trade liberalization and real exchange
rate with trade balance while a signifi cant negative relationship with GDP for the time
period 1970-2008 in Pakistan. Such results stress on to improve the trade balance through
a pertinent change in trade composition by diversifying our export contents and enhanced
competitiveness.

Keywords

Trade liberalization, trade balance, cointegration, Pakistan

Hrčak ID:

85787

URI

https://hrcak.srce.hr/85787

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