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The impact of financial openness, trade openness on macroeconomic volatility in Pakistan: ARDL Co Integration approach

Mujahid, Hira and Alam, Shaista (2014): The impact of financial openness, trade openness on macroeconomic volatility in Pakistan: ARDL Co Integration approach. Published in: E3 Journal of Business Management and Economics , Vol. 5, No. 1 (January 2014): 001-008.

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Abstract

The purpose of this paper is to investigate the relationship between trade openness, financial openness, and macroeconomic volatility in Pakistan. For this purpose, time-series data from 1970-to 2010 and the ARDL cointegration technique were used to find the long-run relationship. The results proposed that in the long run, trade openness generates volatility in output and investment, whereas financial openness has a significant effect only on investment volatilities. Furthermore, the error correction model suggested that in the short run, trade and financial openness significantly affect output, consumption, and investment volatilities.

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