Impact of Trade Liberalization on External Debt Burden: Econometric Evidence from Pakistan

Sabahat Zafar and Muhammad Sabihuddin Butt

MPRA Paper from University Library of Munich, Germany

Abstract: Pakistan’s leading challenge today is to lessen its debt burden in order to pursue a path that leads towards sustainable and impartial growth for poverty diminution. The consequences of trade liberalization are of growing concern, mainly in the emerging economies with severe brim over effects on their debt situation. The major objective of this paper is to discuss the current external debt problem in Pakistan and analyze how its external debt is interrelated with trade liberalization policies and measures .Using data from the last three decades, this paper investigated whether there exist a momentous relationship between external debt and the trade liberalization variables or not. In this case study ARDL bounds testing approach is employed to investigate the long run relationships and Error Correction Method (ECM) for short run dynamics. After finding the order of integration through implementing the Augmented Dickey Fuller (ADF) and Phillips-Perron unit root tests, our finding suggested a significant long run positive association between external debt and trade liberalization is existed in case of Pakistan

Keywords: External Debt; Trade Liberalization; ARDL Bounds Testing; Error Correction Method (search for similar items in EconPapers)
JEL-codes: C32 F0 F43 H63 (search for similar items in EconPapers)
Date: 2008-06-23
New Economics Papers: this item is included in nep-cwa and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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