Trade Openness as a Determinant of Sectoral Growth in Pakistan: A Time Series Analysis

Abstract

The current study aims to search the impact of trade openness on the three main sectors of Pakistan. This research work uses the time series data to obtain the empirics. The world Development indicators 2021 helps to gather the data from 1989 to 2021. Time series data handling starts with the checking the individual series and ADF test helps to identify the stationary. The mixed order of levels of integration recommended to use the ARDL to obtain the long run relations among the variables. The results reveals that the foreign direct investment is negative and significant in agriculture sector. For industrial sector it is positive and significant and same for services sector. Results indicates that the gross capital formation is significant and but negative in agricultural. Negative impact in industrial sector but significant means that capital is not utilized at its optimal level, while it is significant and positive in services sector. All these results indicate that the impact of trade is significant but the controlled variables show that for developing countries like Pakistan FDI and Capital formation divert it from agricultural economy and pushing it towards industrial economy.