Trade Liberalisation and Industrial Growth in Pakistan: A Cointegration Analysis

Using the framework of an endogenous growth model, this paper empirically analyses the
relationship between trade policies and industrial growth in Pakistan during the period 1973 -
1995. The cointegration and error correction modelling approaches have been applied. The
empirical results suggest that there exists a unique long-run relationship among the
aggregate growth function of industrial value added and its major determinants of the real
capital stock, the labour force, real exports, the import tariff collection rate and the
secondary school enrolment ratio. The short -term dynamic behaviour of Pakistan's growth
function of industrial value added has been investigated by estimating an error correction
model in which the error correction term has been found to be correctly signed and
statistically significant.