Exports-Led Growth Hypothesis: The Econometric Evidence From Pakistan

The study aims at investigating the Export-led growth hypothesis in Pakistan by applying Unit root test, Cointegration, Vector error model and Granger causality tests. Time series data of the selected variables (Real GDP, capital, employed labor force, exports, consumer price index and terms of trade) for the period of 1972-2012 is used for analysis. The export-led growth hypothesis claims that exports positively contribute to economic growth. The results revealed that there is a strong positive long run as well as short run relationship between exports and economic growth in Pakistan. It is recommended on the basis of findings that the government should announce export bonus, export financing and export credit guarantee schemes to encourage the exports. Export processing zones should be established. These zones will not only catch the attention of foreign investors but also provide access to international markets to Pakistani exporters.