Trade Balance and Pakistan Economy using ARDL model: A Perspective of Trade Deficit Developing Economies

Authors

  • Sana Hanif Bahauddin Zakariya University, Multan, Pakistan.
  • Syeda Neha Fatima The Women University Multan, Pakistan.
  • Muhammad shahid Iqbal NED-UET Karachi Pakistan.
  • Salman Hanif Beijing Jiaotong University, Beijing, China.
  • Sania Batool Bahauddin Zakariya University, Multan, Pakistan.

DOI:

https://doi.org/10.52131/joe.2023.0504.0186

Keywords:

Trade Balance, ARDL, Cointegration, Trade Deficit, Currency Rate, Developing Economy

Abstract

The influence of trade balance on the economy provides opportunities and challenges against an ongoing global uncertain environment. Existing studies take a broad picture to analyze such influence, often failing under specific implications, indicating a need for a close perspective. Taking this background, this paper aims to study the main features of the complex association between trade balance and economic growth through a close perspective of Pakistan. Accordingly, the study follows econometric techniques and applies the autoregressive distributed lag (ARDL) model on time series days of Pakistan from 1970-2021. In methodology, various statistical techniques are applied to refine the findings, mainly unit-root analysis and cointegration modeling in both long and short-run evaluations. In addition, dependence on trade balance was measured against independence of currency rate, joblessness, investment, and overall domestic production. Findings revealed that the local currency rate, in the long run, has a negative and significant association with the trade deficit, suggesting a growth in exports by lowering that rate. It also boosts local manufacturing to compete against imports, which feel costly. These results can facilitate customizing the local policy guidelines at the national level or in developing countries with similar financial issues like trade deficits. This study’s implications suggest that a close viewpoint between trade balance and the economy could guide in pursuing area-specific goals on a sustainable basis.

Author Biographies

Sana Hanif, Bahauddin Zakariya University, Multan, Pakistan.

M.Phil. Scholar, School of Economics

Syeda Neha Fatima, The Women University Multan, Pakistan.

PhD Scholar, School of Economics

Muhammad shahid Iqbal, NED-UET Karachi Pakistan.

Assistant Professor, Department of Economics and Management Sciences

Salman Hanif, Beijing Jiaotong University, Beijing, China.

PhD Scholar, School of Economics and Management

Sania Batool, Bahauddin Zakariya University, Multan, Pakistan.

M.Phil. Scholar, School of Economics

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Published

2023-12-31

How to Cite

Hanif, S., Fatima, S. N., Iqbal, M. shahid, Hanif, S., & Batool, S. (2023). Trade Balance and Pakistan Economy using ARDL model: A Perspective of Trade Deficit Developing Economies. IRASD Journal of Economics, 5(4), 1162 – 1173. https://doi.org/10.52131/joe.2023.0504.0186