Abstract
This paper addresses three issues (a) it attem pts to estimate whether product and geo-graphical export diversification has contributed to GDP growth during the 1972-2015 period, (b) identify the determinants of export diversification during this period and (c) ascertain whether a structural break in the export diversification-GDP growth relationshi p has occurred after 2000, since when policy of liberalization has been pursued. We find a significant though modest positive association between export diversification and GDP growth during 1972-2015 and some evidence that this relationshi p though remaining statistically significant, however, it somewhat weakened during the liberalization period 2000-2015. We also find that private sector credit and human capital growth and favorable movements in Pakistan’s aggregate terms of trade are negatively associated with product export diversification. Export diversification is currently a policy priority; however, the government’s emphasis has been geographical – not product – export diversification. Our estimations show no positive significant relationship between geographical export diversification and GDP growth. We therefore suggest that incentives should be provided to induce Pakistani exporters to attem pt to penetrate global value chain in product areas in which they already have a presence by linking their business strategies to carefully selected leading global market players.
Keyword(s)
Export diversification, GDP, Pakistan, Co-integration regression, export policy