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A Comparison of Agricultural, Industrial and Services Sector Impact on Trade Balance: A Case Study of Pakistan

Muzammil, Muhammad (2020): A Comparison of Agricultural, Industrial and Services Sector Impact on Trade Balance: A Case Study of Pakistan.

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Abstract

This paper aims to examine the impact of agricultural, services and industrial sector on trade balance of Pakistan and its comparison. For this purpose, we will take time series data from 1980 to 2018. In this study exchange rate, inflation and financial development are taking as a control variable while agricultural, services and industrial value addition variable change according to the model to compare the impact. For the basic analysis we will use descriptive statistics and correlation. To check the stationarity of the variable we will use Augmented-Dickey-fuller and Philips-Perron test. However, to estimate the short and long run relationship between the above model’s variable we will use Auto-Regressive-Distributor-Lag (ARDL) model. Furthermore, to check the short and long run causal relationship we can use VECM granger causality and to check the direction and magnitude of causal relationship we will use impulse response function and variance decomposition analysis. This study can provide recommendations to researchers and policy makers to reduce the range of trade deficit and move towards trade surplus. Furthermore, it also helps Government to focus on the most appropriate sector for trade balance.

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