Aboya, Yousuf and Hussain, Arsalan and Hassan, Rohail and Saleem, Hassan Mujtaba Nawaz and Siddiqui, Aamir Hussain (2020) Different approaches to merchandise trade balance in Pakistan: An econometric evidence. Global Business Management Review, 12 (2). pp. 19-30. ISSN 2600 - 8416

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Abstract

The current study empirically examines the three major approaches to trade balance for Pakistan by utilizing the yearly data from 1972 to 2016. Monetary, elasticity, and absorption approaches were tested by developing a model that incorporates all three approaches. The significant contribution of the study is that it uses only the merchandise trade deficit account, which includes trade of only physical goods. The study used time-series data; therefore, variables have been tested for the stationarity, and it is found that there is a combination of I (0) and I (1) variables, so ARDL bounds testing approach to cointegration has been employed to find the short run and long run associations among the variables. The bound test results discovered that there is a presence of stable long-term association among the merchandise trade deficit account, real broad money supply, real effective exchange rate, and real domestic absorption. The results further revealed that merchandise trade discrepancy is determined purely by the real effective exchange rate, which specifies that the exchange rate's devaluation increases the deficit in the long run whereas in the short-run increase in domestic absorption decreases the merchandise trade deficit.

Item Type:	Article
Uncontrolled Keywords:	Merchandise, absorption approach, monetary approach, elasticity approach, bound test, trade balance.
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	School of Economics, Finance & Banking
Depositing User:	Mrs. Norazmilah Yaakub
Date Deposited:	05 Apr 2021 00:57
Last Modified:	05 Apr 2021 00:57
URI:	https://repo.uum.edu.my/id/eprint/28207

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