The Impact of Trade Liberalization on Economic Growth in Pre and Post Financial Liberalization Era: A Case Study of Pakistan

Abstract

The paper empirically examines the impact of trade liberalization on economic growth in Pakistan using annual time series data for the period 1974-2015. The impact of trade liberalization has been estimated under two scenarios i.e. before and after financial liberalization. ARDL approach is used for empirical analysis. The study reveals a significant positive overall effect of trade liberalization on economic growth. Trade liberalization in post financial liberalization has significant negative impact on economic growth. The outcome also highlights the role of other variables in determining the economic growth. Employed labour force affects economic growth positively but is insignificant. Gross fixed capital formation significantly positively affects economic growth while inflation has significant negative impact on economic growth. It is concluded that Pakistan’s economy undergo contraction when trade liberalization is implemented in post financial liberalization era.