Causal Relationship Between Export And Economic Growth In Pakistan

There is no doubt that increasing in international trade is supporting the economic growth across the world, raising incomes and creating jobs. However, international trade can also some create economic obstacles, such as the international context and the market policy and regulations of each country, and consequently it can be said that the effects would have positive and negative sides, and it is useful to mention all of them and to take them into consideration.

As one determinant of GDP is exports, it is relevant to discuss the matter with relevance to the UK and Germany. As mention in the literature review, during 1955-1960 exports in Germany

The Complete Idiot's Guide to Economics © 2003 by Tom Gorma Retrieved on February 27, 2012 http://www.infoplease.com/cig/economics/effect-imports-exports-gdp.html

The figures of both the trace statistics and the Max-Eigen statistics are all greater than their critical values at 5% significant level and also their corresponding probabilities are less than 5%, this implies that we reject the null hypothesis of no co-integration relationship at the 5% significant level for None and At most 1 respectively. But as we reject the null hypothesis of no co-integration relationship at the 5% significant level for None and At most 1, we fail to reject the null hypothesis of At most 2 co-integration relationship at the 5% significant level; since both the trace statistics (41.94812) and Max-Eigen test statistics (19.94812) are less than their critical values at same significant levels of (47.85613) and (27.58434) respectively. The co-integration test score shows the existence of long-run relationship among agricultural growth, export, foreign direct investment, infrastructure development, intellectual property right, literacy rate and research &

Cuts in protection have increased imports but the increased efficiency has led to a comparable rise in exports. The value of exports plus imports of goods and services has risen from 32% of GDP in 1975 to 48% of GDP in 2000 (ABS), reflecting

Foreign demand for a primary product may also limit economic growth as demand for a particular commodity will cause an increase in demand for a country’s currency, thus resulting in the appreciation of the currency. This would reduce the competitiveness of the country’s manufactured exports, thus leading to a decrease in the financial resources gained from exports which could have enabled the country to raise the level of economic welfare to encourage development.

Therefore, if people have more money then they are likely to purchase more goods - potentially ones from our country, thus exports will rise and the value of net exports will increase. If disposable income abroad is low then exports will fall and the value of net exports will fall.

In reviewing the textbook, Macroeconomics: Principles for a Changing World, one topic of interest was Chapter 2, "Production, Economic Growth, and Trade". There were numerous articles relating to the assigned reading and class instructions. Three of these articles are summarized below, then linked to the class material. The chosen articles are "UK economy suffers slashed growth outlooks and lacklustre trade data" by Josie Cox and Ben Chu, "For Dignity and Development, East Africa Curbs Used Clothes Imports" by Kimiko de Freytas-Tamura, and "Thai growth revised upwards to 3.9 per cent". All of these sources focus on the aspects of economic growth and trade.

Nowadays, the outlook of the global economy is clearly not optimistic, and there are so many severe issues have been plaguing the world economy in recent years. Such as potential asset bubbles, higher financial market volatility, weaker global demand, and deteriorating monetary and credit crisis, and falling of oil prices, and so on a series of troubles around the world. (World Economic Situation and Prospects 2016 2016)Once when we discuss and analyse those economic problems, it is inevitable to associate with China’s slowdown. Indeed, since China entered WTO, China takes advantages of large population to develop the labour intensive industries like manufacturing to expand the relationship with the world by frequently international trade, as greater interaction and stronger cooperation between China and the world, Chinese economy is merged to the world economy and become an integral part of the global economy. Therefore, the Chinese slowdown is bound to affect the growth of world economy. So the question arises, why China slows down its economy? If exploring further to figure out why, one factor which cannot be ignored is the declining export. (China’s Export Decline Accelerates 2016) Thus, the study I concentrate on is to investigate the reasons of declining export in Chinese international trade.

As pointed out by Sodersten and Reed(1994), this is a theory of long-term general equilibrium in which two factors of production labour and capital are both mobile between sectors. Hereafter, further theory came which described the “new growth theory”. It originated from the mechanism through which exports affect economic growth. For instance, Grossman and Helpman (1990) proposed a two-country growth model with endogenous technological progress. In their model, exports help to promote technology and knowledge diffusion and thus in recent period, the extensive literature concerning the relationship between trade and growth is also the consequence of the many changes that have taken place in the fields of development economics and international trade policy. An example of these changes is the tremendous modification from inward oriented policies to export promotion strategy. By the early 1980s export-led orientation and export promotion had already secured a wide consensus among researchers and policy makers, to such an extent that they had become “conventional wisdom” among most economists in the developing world (Tyler, 1981; Balassa, 1985). This strategy is still advocated by some international organizations, the international bank community and multilateral lenders such as the World Bank and the International Monetary Fund (IMF), and among the mainstream policy makers.

Apart from foreign direct investment exports has been one of the determinants of upholding higher economic growth, better schooling and life expectancy due to their assimilation in the world economy. Developing countries can enlarge their markets by allowing firms exporting and achieving economies of scale. Exporting is one of the prominent channels of technology transfer to other nations (Pack. 1993) . Normally industrial policies are prepared to stimulate exports. The export competitiveness or export performance generally can be measured by several factors, for instance, real exchange rate, comparative advantage, terms of trade, geographic concentration, trade policies, world income etc. We have used Revealed Comparative Advantage and gravity

In this section, we discuss our findings of Engle–Granger cointegration test which we applied in order to identify whether there is cointegration relationship between dependent variable – the real non-oil GDP and independent variables - real credit to the private sector and non-oil sector real effective exchange rate. The steps of the EG approach have been undertaken in order to obtain the long-run model that explains the relationship between these variables.

As we can see in table below, India tends to rely on its own production ((decrease in the imports to the country); where its exports are increasing (( enhanced production).

Another factor influencing growth is the significance of international trade. In countries that don’t participate in international trade, such as , there is very slow or no economic growth. This is because it is very hard for one economy to produce all goods which people require. It is better to specialise in a few goods, use them, sell the

From the result, we realized that international trade in Liberia more than decades has produced a very little significant impact on economic growth. As a result, the viewpoint of the economy as of (1980-2014) is not much hopeful in spite of the constant trade flow into Liberia though, the country economy still undergoes so many problems, in this light, all variables using as proxies to international trade, only imports (IMP) was positive and significant while other remained significant but negative. This indicates major problems in the economy of Liberia and also confirmed why the nation economy has recorded a trade deficit