Welfare impact of external balance in pakistan: CGE-microsimulation analysis
Vaqar Ahmed () and
Cathal O' Donoghue
Authors registered in the RePEc Author Service: Cathal O'donoghue ()
MPRA Paper from University Library of Munich, Germany
This paper studies the welfare impact of changes in the external balance of a developing economy (Pakistan). We explain that the economic growth achieved during the past decade is highly dependent on the improvements in external balance. After 2001, Pakistan has benefited from, an increase in the inflow of remittances, foreign assistance from bilateral and multilateral sources, and a relatively stable exchange rate. This was complimented by growth in the real sector. The GDP grew at an average of 7 percent from 2002 to 2007. During the same time period the growth in per-capita income was around 13 percent in dollar terms. This performance however has come under pressure due to the rising inflation, slowing down of global economy and external price shocks. The increase in import price of petroleum, raw materials and other manufactured goods has the potential of reducing the growth performance, impacting the competitiveness of the economy and thereby threatening the gains achieved during the past seven years in reducing the poverty levels. We study using a CGE-microsimulation model the effects of changes in import prices faced by Pakistan. Also provided in the simulation exercise is an analysis of increase in foreign savings that are usually prescribed for developing economies in order to augment the domestic savings and channelling investment towards developments in infrastructure and social sectors.
Keywords: Computable General Equilibrium Model; Microsimulation; Balance of Payments; Economic Growth; Poverty; Inequality; Pakistan (search for similar items in EconPapers)
JEL-codes: D58 C01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-cwa
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