An Appraisal of Exports and Imports Nexus for Pakistan

Abstract

The trends of imports and exports possess a well-built role in the development of the economy of a country. Pakistani is a developing country and has been facing the deficit in its foreign trade balances since its emergence in 1947. In this paper, it has been strived to explore the time series appearance of the variables of import and export in Pakistani economy. The period for the research work covers forty-seven years from 1970 to 2016. In the analysis of exports and imports nexus, the unit root test shows that data is not stationary. Secondly, the Johansen co-integration test indicates that only one co-integration equation exists between imports and exports which portray the long run relationship in the variables. Then the Granger causality test illustrates bi-directional causality in long- run for Pakistani imports and exports. The findings of this paper predict that Pakistani trade is on its right way of getting long term equilibrium but disequilibria in trade balances prevail in the short periods. Hence the present study suggests modifications in the foreign trade policy to increase the export import ratio and raise the volume of trade so that the short-term imbalances could be improved.