Financial Development and Textile Sector Competitiveness: A Case Study of Pakistan

Muhammad Hanif and Sabina Khurram Jafri ()
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Sabina Khurram Jafri: State Bank of Pakistan

No 20, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: This paper makes an attempt to explore the relationship between the financial development and international trade competitiveness in the case of Pakistan – an issue that has not been investigated earlier. We construct Balassa’s Revealed Comparative Advantage (RCA) index for textile sector of Pakistan. Using ratio of credit extended to the textile sector to the total non-government credit of the banking system (TCS) as proxy for external finance, we estimate long run relationship and ECM, between RCA index and TCS while controlling for other determinants of the international trade competitiveness of textile sector of Pakistan. In line with the findings of Beck (2002) and Fanelli and Medhora (2002), our results suggest that dependence on external finance has a positive impact on the country’s textile sector competitiveness both in the short and the long run even when we control for traditional determinants of competitiveness. Length: 23 pages

Keywords: Financial development; international trade; credit; competitiveness (search for similar items in EconPapers)
JEL-codes: C32 E51 F14 F49 L67 (search for similar items in EconPapers)
Date: 2008-01
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Financial Development and Textile Sector Competitiveness: A Case Study of Pakistan (2006)
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