Empirical Evidence on the J-Curve Between Pakistan and Selected South Asian Trade Partners
European Business & Management
Volume 3, Issue 4, July 2017, Pages: 57-64
Received: Jul. 4, 2017; Accepted: Jul. 12, 2017; Published: Aug. 3, 2017
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Waqar Khalid, School of Economics, Quaid-I-Azam University, Islamabad, Pakistan
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The earlier researches investigated the J-curve hypothesis along with the Marshall-Lerner condition in Pakistan used the OLS, 2SLS, 3SLS, and Instrumental Variables (IV) techniques. The estimates obtained from these studies may suffer from spurious regression problems as the models were estimated without incorporating the co-integrating property of the variables. Hence, the objective of this work is to analyze the trade balance model using relatively the new co-integration approach, the ARDL model. The J-curve phenomenon is tested for Pakistan’s trade with her selected South Asian trade partners, including Republic of India and Democratic Socialist Republic of Sri Lanka using the annual time series data over the 1975-2013 periods. After empirical analysis, it was observed that the J-curve occurrence is rejected in favor of Pakistan with its trading partners. This study concludes that depreciation of Pakistani Rupee has a constructive result on Pakistan’s trade with these trade partners.
J-curve, Depreciation, Trade Balance, Cointegration, Pakistan, India, Sri Lanka
To cite this article
Waqar Khalid, Empirical Evidence on the J-Curve Between Pakistan and Selected South Asian Trade Partners, European Business & Management. Vol. 3, No. 4, 2017, pp. 57-64. doi: 10.11648/j.ebm.20170304.11
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