Does Trade Liberalization Improve Trade Balance in Pakistan?

Muhammad Khan, Atif Ali Jaffri, Faisal Abbas and Azad Haider ()

South Asia Economic Journal, 2017, vol. 18, issue 2, 158-183

Abstract: This article examines the impact of trade liberalization, that is, reduction of tariff and non-tariff barriers on trade balance, in Pakistan over the period 1982–2013. The results reveal that reduction of average effective tariff rate improves trade balance in the short run, while lowering of non-tariff barriers deteriorates trade balance in the long run as well as in the short run. The analysis also suggests that depreciation of real effective exchange rate and foreign income causes an improvement in the trade balance, whereas domestic income deteriorates it. The negative association between the reduction in non-tariff barriers and trade balance worsens sustainability of current account of the balance of payments in Pakistan.

Keywords: Trade liberalization; trade balance; real effective exchange rate; bounds test of co-integration (search for similar items in EconPapers)
JEL-codes: C22 F10 F32 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:soueco:v:18:y:2017:i:2:p:158-183

DOI: 10.1177/1391561417713128

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