Effects of Terms of Trade on Economic Growth of Pakistan

Date01 February 2018
Published date01 February 2018
DOI10.1177/0015732516663315
Subject MatterArticles
Effects of Terms
of Trade on Economic
Growth of Pakistan
Khalil Jebran1
Amjad Iqbal2
Zia Ur Rehman Rao3
Arshad Ali4
Abstract
This paper analyzes the effect of terms of trade on economic growth of Pakistan
considering annual time series data from 1980 to 2013. This study opted autore-
gressive distributed lag model for purpose of analyzing short- and long-run rela-
tionship. The results reveal significant negative long-run and short-run effects
of terms of trade on economic growth. The analyses also indicate significant
positive long-run and short-run effects of labour on economic growth. Further,
capital stock is influencing positively the economic growth in long run only.
We suggest that economic policies may be implemented to deteriorate terms of
trade which will further enhance the economic growth of Pakistan.
JEL: F13, F43
Keywords
Economic growth, terms of trade, ARDL, Pakistan
Introduction
Terms of trade (TOT) is the ratio of domestic export price relative to import price.
In simple words, it is the ratio of exports and imports of a country. The association
between TOT and economic growth is still an issue of debate for most of the
Foreign Trade Review
53(1) 1–11
2018 Indian Institute of
Foreign Trade
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0015732516663315
http://ftr.sagepub.com
Corresponding author:
Khalil Jebran, PhD Scholar, School of Accounting, Dongbei University of Finance and Economics, China.
E-mail: khaliljebranuom@gmail.com
1 PhD Scholar, School of Accounting, Dongbei University of Finance and Economics, China.
2 Assistant Professor, Center for Management and Commerce, University of Swat, Pakistan.
3 Assistant Professor, Institute of Business and Management, University of Engineering and Technology,
Pakistan.
4 Associate Professor, Department of Management studies, University of Malakand, Pakistan.
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