Estimating the Long-Run Creditworthiness of Pakistan

Hashmi, Rimsha Karim and Qayyum, Abdul (2016): Estimating the Long-Run Creditworthiness of Pakistan.

Abstract

The paper analyzes the long-run creditworthiness of Pakistan. The analysis is conducted on time series data of the years 1972-2013. Two Probit Models are estimated by Maximum Likelihood Method. Three specifications of Probit Model of long-run creditworthiness of Pakistan are estimated. These alternative specifications are due to measurement of expected net capital inflows/GDP ratio. It is found that with the inclusion of lagged net capital inflows/GDP ratio in the first Probit Model, the DS/GDP ratio and INV/GDP ratio are found to be significantly impacting the long-run creditworthiness of Pakistan. In the second Probit Model, when POP/GDP ratio is included as an alternate to INV/GDP ratio, the two alternative specifications for expected net capital inflows/GDP ratio mainly the current values of net capital inflows/GDP ratio and the lagged values of net capital inflows/GDP ratio, DS/GDP ratio and POP/GDP ratio all significantly impact the long-run creditworthiness of Pakistan.

• Item Type: MPRA Paper
• Language: English
• Keywords: Long-run creditworthiness, Pakistan, Probit Model, Maximum Likelihood Method
• Subjects: F - International Economics > F3 - International Finance

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