Indexing
All Issues
Submission
Author Guidelines
Reviewers
Editorial Members
Publication Fee
Vol.4 , No. 3, Publication Date: Aug. 31, 2017, Page: 21-31
| [1] | Samina Naveed, Department of Economics, School of Social Sciences and Humanities, National University of Sciences & Technology, Islamabad, Pakistan. |
The positive contribution of the free capital movement in the growth of the economies as advocated by proponents of neo classical theorists has led the number of developed and developing economies to undertake liberalization of their external sectors. This paper examines the impact of capital account liberalization on economic growth in case of Pakistan from 1972-2010. The paper in particular captures the external financial liberalization through de Jure measure after a thorough investigation of the reform process. This measure is a quantitative measure based on a scale that captures the gradual liberalization of capital account openness in Pakistan. While controlling for other growth control variables and using multivariate co integration technique and error correction mechanism, the empirical results indicate a positive impact of capital account openness on growth in the long run. However, the size of the coefficient as well as its low significance level implies that capital account liberalization is not a significant contributor to growth. The results of the study show that external sector financial reforms have not contributed significantly to the economic growth of the country. To materialize the benefits of external financial openness, the reforms should be accompanied with those favorable factors that are important for the successful implementation of reforms.
Keywords
Capital Account Liberalization, Economic Growth, Multivariate Co Integration, Vector Error Correction Model (VECM), Pakistan
Reference
| [01] | Fischer, S. (1998) Capital Account Liberalization and the Role of the IMF, in “Should the IMF Pursue Capital-Account Convertibility?,” Essays in International Finance, Department of Economics, Princeton University, Vol. 207, pp. 1–10. |
| [02] | Summers, L. H. (2000) International Financial Crises: Causes, Prevention, and Cures. American Economic Review, 90(2):1–16. |
| [03] | Eichengreen, B. (2001) “Capital Account Liberalization: What Do Cross-Country Studies Tell Us?” The World Bank Economic Review, 16(3), 341-365. |
| [04] | Edison, H. J., M. W. Klein., L. A. Ricci and T. Slok (2004) "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan Journals, 51(2). |
| [05] | Prasad, E., K. Rogoff, S. J. Wei, and M. A. Kose (2003) Effects of Financial Globalization on Developing Countries: Some Empirical Evidence. International Monetary Fund. |
| [06] | Rodrik, D. (1998) Who Needs Capital-Account Convertibility? Essays in Internationa Finance, No. 207 (Princeton, New Jersey: Princeton University) |
| [07] | Quinn, D. (1997) Correlates of Changes in International Financial Regulation. American Political Science Review, 91(3):531-551. |
| [08] | Edward, S. (2000) Capital Mobility and Economic performance: Are Emerging Economies Different? University of California, Los Angeles and National Bureau of Economic Research. |
| [09] | Arteta, C., B. Eichengreen, and C. Wyplosz (2001) When Does Capital Account Liberalization Help More than It Hurts? National Bureau of Economic Research, Cambridge. |
| [10] | Eichengreen. B, and D. Leblang (2003) Capital Account Liberalization and Growth: Was Mr. Mahathir Right? NBER Working Paper No. W 9427 (Cambridge, MA: National Bureau of Economic Research). |
| [11] | Klein, M. W. and G. P. Olivei (2001) Capital Account Liberalization, Financial Depth and Economic Growth. Tufts University and NBER. |
| [12] | Klein, M. (2005) Capital Account Liberalization, Institutional Quality and Economic Growth: Theory and Evidence. NBER Working Paper No. 11112 (Cambridge, Massachusetts: National Bureau of Economic Research) |
| [13] | Bonfiglioli., A. (2005) How Does Financial Liberalization affects Economic Growth? Seminar Papers 736, Stockholm University, Institute for International Economics Studies. |
| [14] | Bekaert, G., C. R. Harvey and C. Lundblad (2001) Does Financial Liberalization spur Growth? NBER Working Paper 8245, National Bureau of Economic Research, Cambridge. |
| [15] | Ozdemir, D. and C. Erbil (2008) Does Financial Liberalization Trigger Long-Run Economic Growth? Evidence from Turkey and Other Recent EU Members. Paper prepared for the EcoMod International Conference on Policy Modelling, July 2-4, Berlin. |
| [16] | Kose, M. A., E. Prasad, K. Rogoff, and S. J. Wei (2006) Financial Globalization: A Reappraisal. IMF Working Paper, Research Department, Washington, D. C: International Monetary Fund. |
| [17] | Lane, P. R. and G. M. M. Ferretti (2006) The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004. Journal of International Economics, 73(2), 223-250. |
| [18] | Edison, H., R. Levine, L. Ricci, and T. Slok (2002) International Financial Integration and Economic Growth. Journal of International Monetary and Finance, 21(6):749–76. |
| [19] | Shahbaz., M, A. Wahid, K. Ahmed and A. R. Chaudhary (2008) Capital Account Openness and Economic Growth Nexus: The Case Study of Pakistan. Journal of Economics and Business,11(1): 11-33 |
| [20] | Janjua, M. A. (2011) Liberalization of Capital Account in Pakistan. Paper Presented at Annual Conference of Lahore School of Economics. |
| [21] | Haque, I. (2011) The Capital Account and Pakistani Rupee Convertibility: Macro Economic Policy Challenges, The Lahore Journal of Economics, 16: 95-121. |
| [22] | Hanif., M. N (2002) Restructuring of Financial Sector in Pakistan, MRPA Paper No.10197 |
| [23] | State Bank of Pakistan (2000), Financial sector Assessment 1990-2000. Karachi; State Bank of Pakistan. |
| [24] | Burney, N. A. (1986) Sources of Pakistan’s Economic Growth. Pakistan Development Review, 25(4): 573-589. |
| [25] | IMF (International Monetary Fund), International Financial Statistics (various Issues). International Monetary Fund, Washington D. C. |
| [26] | Pakistan Economic survey (various Issues), Ministry of Finance, Government of Pakistan. |
| [27] | State Bank of Pakistan (2010) Handbook of Statistics on Pakistan Economy. Karachi: State Bank of Pakistan |
| [28] | IMF (International Monetary Fund), Annual Report on Exchange Arrangements and Exchange Restrictions 2010. International Monetary Fund, Washington D. C. |
| [29] | Grilli, V. and G. M. M. Ferretti (1995) Economic Effects and Structural Determinants of Capital Controls. IMF Working Paper. International Monetary Fund. |
| [30] | Janjua, M. A. (2004) History of State Bank of Pakistan 1988-2003. State Bank of Pakistan, Printing Press, Karachi. |
| [31] | State Bank of Pakistan (Various issues) Quarterly Bulletins. Karachi: State Bank of Pakistan |
| [32] | State Bank of Pakistan (Various issues) Annual Reports. Karachi: State Bank of Pakistan |
| [33] | Maddalla, G. S. (1992) Introduction to Econometrics. 2nd edition. New York: MacMillan. |
| [34] | Johansen, S. (1988) Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control. 12, 231—254. |
| [35] | Johansen, S. and K. Juselius (1990) Maximum likelihood Estimation and Inference on Cointegration with application to the Demand for Money. Oxford Bulletin of Economics and Statistics. 52, 169-210. |
| [36] | Reinsel, G. C. and S. H. Ahn. (1988) Asymptotic Properties of the Likelihood Ratio Test for Co integration in the Nonstationary Vector AR Model. Technical Report, Department of Statistics,University of Wisconsin, Madison. |
| [37] | Reinsel, G. C. and S. H. Ahn. (1992) Vector Autoregressive Models with Unit Roots and Reduced Rank Structure; Estimation, Likelihood Ratio Tests and Forecasting. Journal of Time Series Analysis, 13,353-375. |
| [38] | Mody, A. and A. P. Murshid (2005) Growing Up With Capital Flows. Journal of International Economics, 65(1): 249–66. |
| [39] | Eichengreen, B., R. Gullapalli, and U. Panizza (2009) Capital Account Liberalization, Financial Development and Industry Growth: A Synthetic View. University of California, Berkley and UNCTAD. |
| [40] | Edison, H., R. Levine, L. Ricci, and T. Slok (2002) International Financial Integration and Economic Growth. Journal of International Monetary and Finance, 21( 6):749–76. |
| [41] | Athukorala, P. C (2000) Capital Account Regimes, Crisis and Adjustment in Malaysia. Asian Development Review, 18(1): 17-48. |
| [42] | Prasad,E., K. Rogoff, S. J. Wei, and M. A. Kose (2003) Effects of Financial Globalization on Developing Countries: Some Empirical Evidence. International Monetary Fund. |
| [43] | Siddiqui., R. (2004) Energy and Economic Growth in Pakistan. Pakistan Development Review, 43 (2): 175-200. |
| [44] | Ahmed, S. (1994) Explaining Pakistan’s High Growth Performance over the last two Decades Can it be Sustatined? Policy Research Working Paper 1341, The World Bank. |
| [45] | IMF (2005), IMF Country Report No. 05/408, International Monetary Fund, Washington D. C. |
| [46] | Das, A. and B. P. Paul (2011) Openness and Growth in emerging Asian economies: Evidence from GMM estimations of a dynamic panel. Economics Bulletin, 31(3): 2219-2228. |
| [47] | Awan, N. W., S. M. Shah, and H. Rasheed (2011) A Dynamic Analysis of Education and Economic Growth in Pakistan: Analysis in form of Co-integration. Department of Educational Planning and Management, Allama Iqbal Open University, Islamabad. |
| [48] | Spiegel, M. (1994) Determinants of Long-Run Productivity Growth: A Selective Survey with Some New Empirical Results. Department Of Economics, University Of Rochester, New York. |
| [49] | Lan, L., D. Jamison, and L. Louat (1991) Impact of Education by Region, World Bank, Washington, D. C., Processed. |
| [50] | Dasgupta, P. and M. Weale (1992) On Measuring the Quality of Life. World Development, 20(1): 119-131. |
| [51] | Pritchett, L. (2001) Where Has All the Education Gone? The World Bank Economic Review. 15(3): 367-91. |
