Muhammad, Shahbaz and Faridul, Islam and Muhammad Sabihuddin, Butt (2011): Devaluation and income inequality: Evidence from Pakistan.
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The paper examines the impact of nominal devaluation on income distribution in Pakistan. In the empirical model we include economic growth, measured per capita; trade-openness; foreign direct investment (FDI); unemployment and inflation rates which appear well justified in the particular context of the economy of Pakistan. The Auto Regressive Distributed Lag (ARDL) bounds testing approach to cointegration has been employed for the long run relation; and the Vector Error Correction Model (VECM) for the short run dynamics. We also test the Kuznets inverted-U relation between income inequality and economic growth. We find long run relationship among the series; and that nominal devaluation worsens income inequality. Though economic growth appears to deteriorate income distribution, the non-linear link between the variables depicts Kuznets’ (1955) type inverted-U relationship. This is reassuring for Pakistan in the long run. We also find FDI and trade-openness worsens income distribution. Inflation lowers income inequality but unemployment aggravates it in Pakistan.
|Item Type:||MPRA Paper|
|Original Title:||Devaluation and income inequality: Evidence from Pakistan|
|English Title:||Devaluation and Income Inequality: Evidence from Pakistan|
|Keywords:||Devaluation, Income Inequality, EKC, ARDL|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Muhammad Shahbaz|
|Date Deposited:||21. Dec 2011 15:25|
|Last Modified:||12. Feb 2013 07:52|
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