Impact of Trade Openness on Economic Growth of Pakistan- An ARDL Approach

Abstract

This study examines the impact of trade openness on economic growth of Pakistan by employing autoregressive distributed lag (ARDL) approach over the period 1960-2011. Overall empirical results show that trade volume, investment and human capital have positive and significant impact on economic growth. Findings further reveal that trade restriction measures have negative and significant impact on economic growth in long run. Moreover, results show that the impact of trade openness on economic growth is not obvious in short run. The findings suggest that developing countries like Pakistan need to consider trade openness policy as a long term plan of the counhy. The policy direction of Pakistan should emphasize on more liberal policies to enhance economic growth which will eventually lead towards poverty reduction in Pakistan.