Prague Economic Papers 2014, 23(1):121-139 | DOI: 10.18267/j.pep.476

Effects of Trade Liberalization on Exports, Imports and Trade Balance in Pakistan: A Time Series Analysis

Muhammad Zakaria
COMSATS Institute of Information Technology, Islamabad, Pakistan (mzakaria80@hotmail.com).

Using time series data, the paper empirically analyzes the effects of trade liberalization on exports, imports and trade balance in Pakistan for the period 1981/82 to 2007/08. It concludes that trade liberalization stimulates both exports and imports with the effect being greater on latter than on former thereby worsening the trade balance. Other variables, that is, real exchange rate, domestic and foreign incomes, terms of trade and foreign exchange market distortions affect exports, imports and trade balance in the theoretically expected directions. Inclusion of interaction terms indicate that liberalization stimulates both price and income elasticities of exports, imports and trade balance. These results have important policy implications for degree of trade liberalization in Pakistan.

Keywords: exports, trade liberalization, imports, trade balance
JEL classification: C13, C22, F13

Published: January 1, 2014  Show citation

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Zakaria, M. (2014). Effects of Trade Liberalization on Exports, Imports and Trade Balance in Pakistan: A Time Series Analysis. Prague Economic Papers, 23(1), 121-139. doi: 10.18267/j.pep.476
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