Impact of Trade Openness on Exports Growth, Imports Growth and Trade Balance of Pakistan

M. Aslam Chaudhary and Baber Amin

Abstract

This study mainly aims at analyzing the impact of trade openness on exports growth, imports growth and trade balance of Pakistan. Pakistan has undergone substantial trade openness measures during the last three decades. The main objective behind the openness and liberalization has been to reap the fruits of higher exports which contribute to higher economic growth. The study analyzes the data from 1980-2008. The OLS and Auto Regressive Distributive Lagged modeling approaches have been employed to find empirical support. The results of the study reveal that trade openness affected both exports growth and imports growth positively although the imports growth increased more than exports one, which worsened the trade balance. Nevertheless, trade openness played a limited role and remained constrained in promoting economic growth through exports expansion. Thus, there is a need to create a balance between exports and imports growth to reap the fruits of openness.