Lahore School of Economics

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Reviewing the Import Demand Function of Pakistan: A Time series Analysis from 1970 to 2010

Zunia Tirmazee, Lahore School of Economics
(Paper co-authored/presented with Resham Naveed)

This paper investigates the conventional import demand function of Pakistan using time series data sourced from the World Bank Development Indicators from 1970 to 2010. Using the Vector Error Correction model and Impulse Response Functions it has been shown that for the stated period relative prices and income lose their significance as long run determinants of import demand therefore raising the need for additional determinants. Comparison of residuals of the conventional import demand function and those of the model having Terms of trade and foreign exchange availability in addition to conventional parameters as determinants of import demand, shows that much of what stands undeterministic in the former model is taken care of in the latter model. Furthermore this paper also explores a peculiar trend of falling imports to GDP ratio of Pakistan from 1980’s to 2000 which is unusual for a developing country. In a subsidiary regression analysis for this period only, falling net capital inflows are suspected as the reason for this persistent fall in imports to GDP ratio for these twenty years.

About the presenter:

Zunia Tirmazee is a Teaching fellow at the Lahore School of Economics. She received her Mphil degree in Economics in 2014 at the Lahore School of Economics. Her Mphil thesis is based upon determining the relative wage variation and industry location across districts of Punjab. Her research interests are mainly in applied microeconomics and applied econometrics. Currently she is working as a research assistant in an IGC project titled “Incentives and productivity: Work groups vs. production lines” for the fan sector in Central Punjab under the supervision of Dr. Theresa Chaudhry (Lahore School of Economics).

Resham Naveed is a teaching fellow at Lahore School of Economics. She has done her Mphil in Economics from Lahore School of Economics. She is enrolled in Phd programme for Economics. Topic of her Mphil thesis is “Testing for relative factor price equality in Punjab”. Her research interests are industrial economics and growth theory.

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posted by S A J Shirazi @ 3/26/2014 04:00:00 PM,

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