Regional Macroeconometric Trade Model For Pakistan
Author: Sahar Arshad

Here we estimated the regional Macro econometric trading model for Pakistan. Where we defined the region by taking the countries as Pakistan, India, Sri Lanka and Bangladesh. And we took China as the major trading partner. We wanted to estimate the model and see if regional variables are actually playing a role and should they be seen while making policies. For such purpose, we took number of variables in which some were made into regional by taking their weights accordingly and the rest were taken corresponding to them. We took these variables to create Product function, Investment function, consumption function, export function, import function and price function which formed our production, aggregate demand, trade and aggregate supply block respectively. We will use GMM for estimating the model and since we have number of equations will use system GMM. Since we have time series data, we tested the time series properties through ADF for the variables and saw that there were different order of integration, hence we proceeded to see the short and the long term relationships by applying ARDL and ECM within system GMM. We took the data from 1971-2015. From the results we got it could be seen that in most cases regional variables are affected by the regional variables. But till that date China, as a singular country did not affect regional variables, although gets affected by them. So, it could be deduced that policy makers do need to consider how regional variables act and how their policy makers make policy and create policies accordingly. This study added to the existing literature by acting as a model for this region on which work has not been done. Its imperative however to see this region, especially with emergence of CPEC, and this model could pave way for further future researchers to further check the relationships with more updated data. This model could also be used for forecasting and to check the shocks. The result showed that regional GDP has an autoregressive behavior i.e. gets impacted by its lag and by regional gross capital formation and vice versa. Consumption also has an autoregressive behavior and gets impacted by regional CPI and National disposable income. Regional CPI and GDP affect imports. Regional prices get affected by v regional nominal exchange rate and also by Pakistan’s prices. Thus, these conclusions could be used as to create feasible policies for our country, like inviting more FDI, which has been done in a way by CPEC and is an immensely right step in the progressive direction. Supervisor:- Dr. Ahsan ul Haq Satti Co-Supervisor:- Dr Mahmood Khalid

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Keywords : Macroeconometric Trade Model, Macroeconometric Trade Model-Pakistan
Supervisor: Ahsan ul Haq Satti

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