Role of tariffs, imports substitution and investment efficiency in economic growth of Pakistan

Muhammad Asif (), Amjad Amin, Naila Nazir, Kashif Saeed and Sajjad Jan
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Muhammad Asif: University of Peshawar
Amjad Amin: University of Peshawar
Naila Nazir: University of Peshawar
Kashif Saeed: University of Peshawar
Sajjad Jan: University of Peshawar

Quality & Quantity: International Journal of Methodology, 2022, vol. 56, issue 4, No 17, 2215-2232

Abstract: Abstract This paper explores the impact of tariffs, imports substitution and investment efficiency on economic growth in Pakistan. For this purpose, secondary data was collected from world development indicators from 1981 to 2017. The study found that all variables have integrated at different orders by employing the augmented dickey-fuller test. Econometrically, the study employed Johansen and Juselius (1990) Cointegration Test, vector error correction model and autoregressive distribution lag model to build up the relationship among the variables. The results found that the tariff rate had a positive effect on economic growth. The coefficients of all variables’ like consumer price index, private investment, public investment and exchange rate are positively related to economic growth. While tariffs rate was negatively related to public investment. Moreover, Foreign assistance, consumer price index and Government revenue was positively related to public investment. Employment in Agriculture sector was positively related to economic growth, while Employment in the industrial sector is negatively related to economic growth. There is a positive relationship between employment in the service sector and economic growth. The foreign exchange reserves had a positive effect on economic growth, while Tariffs on all manufactured products had a positive effect on economic growth, while the Tariff on all products are negatively related to economic growth. Finally, the relationship between subsidies and economic growth is directly related. The results of the short-run and long-run relationship amongst the measurable indicators of import substitution had a positive and negative effect on economic growth in Pakistan. This study suggested that the government should re-consider a tariff and import substitution policy to promote economic growth. Due to imposition of high tariff rate and import substitution it will create an opportunity to domestic producer to produce import substitution goods in domestically. It will lead to increase in economic growth.

Keywords: Tariff; Imports substitution; Investment efficiency; Economic growth; VECM; ARDL (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11135-021-01211-w

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