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Pakistan: Indus Basin Water Strategy – Past, Present and Future
Shahid Amjad Chaudhry
Published:Sept 2010
This paper looks at the Indus Basin Water Strategy for Pakistan. It
begins with a historical overview of the Indus Basin Irrigation System
(IBIS), the Indus Basin Replacement Works (1960-1980) and the Indus Basin
Salinity Control Efforts (1960-2000). The paper then looks at the IBIS
irrigation and salinity control investments that have taken place over the
last decade (2000-2010). The paper goes on to look at the present situation
of the IBIS as well as discuss an IBIS strategy for the next decade. Finally,
the paper discusses supply side and demand management strategies for IBIS.
Overall, the paper concludes that Pakistan should focus on (1) Creating
Additional Surface Storage, (2) Preserving surface water (particularly
through lining canals), (3) Controlling Groundwater and controlling
salinity (by discouraging excessive tube-well use), (4) Encouraging general
efficiency of irrigation water use (through improved land management
techniques), (5) Enhancing yields through improved farming practices, and
(6) Fully meeting the environmental concerns of the Indus Delta, river
systems and wetlands.
KEYWORDS:
Indus Basin,
water,
strategy,
irrigation,
Pakistan.
JEL:
Q25,
Q15.
The Determinants of Pakistan’s Trade Balance: An ARDL Cointegration Approach
Waliullah, Mehmood Khan Kakar, Rehmatullah Kakar and Wakeel Khan
Published:Jan - June 2010
This article is an attempt to examine the short and long-run
relationship between the trade balance, income, money supply, and real
exchange rate in the case of Pakistan’s economy. Income and money
variables are included in the model in order to examine the monetary and
absorption approaches to the balance of payments, while the real exchange
rate is used to evaluate the conventional approach of elasticities (Marshall
Lerner condition). The bounds testing approach to cointegration and error
correction models, developed within an autoregressive distributed lag
(ARDL) framework is applied to annual data for the period 1970 to 2005
in order to investigate whether a long-run equilibrium relationship exists
between the trade balance and its determinants. Additionally, variance
decompositions (VDCs) and impulse response functions (IRFs) are used to
draw further inferences. The result of the bounds test indicates that there
is a stable long-run relationship between the trade balance and income,
money supply, and exchange rate variables. The estimated results show that
exchange rate depreciation is positively related to the trade balance in the
long and short run, consistent with the Marshall Lerner condition. The
results provide strong evidence that money supply and income play a strong
role in determining the behavior of the trade balance. The exchange rate
regime can help improve the trade balance but will have a weaker
influence than growth and monetary policy.
KEYWORDS:
Trade balance,
ARDL,
exchange rate,
money supply,
Pakistan.
JEL:
C22,
F10,
F12,
C15.
Unilateral Liberalization versus Regional Integration: The Case of ECO Member Countries
Jahangir Khan Achakzai
Published:Jan - June 2010
Using an international dataset on bilateral trade for 137 countries
in 2005, we estimate a gravity model to address the question of whether
intra-Economic Cooperation Organization (ECO) trade is too low and
whether the scale of trade at present is accounted for by regional
integration or unilateral liberalization. The results of the gravity model
confirm that intra-regional trade is lower than predicted by the gravity
equation. The results also validates the theory that the present level of trade
is attributed to regional agreements rather than unilateral liberalization,
suggesting greater scope for regional cooperation among ECO member
countries.
KEYWORDS:
Bilateral trade,
economic cooperation organization,
regionalism.
JEL:
P45,
N70.
External Shocks in a Small Open Economy: A CGE - Microsimulation Analysis
Vaqar Ahmed and Cathal O’Donoghue
Published:Jan - June 2010
This paper studies the impact of changes in the external balance of
Pakistan. We explain why the economic growth achieved during the past
decade was highly dependent on improvements in the external balance.
Between 2001 and 2007, Pakistan benefited from an increase in
remittances, foreign assistance from bilateral and multilateral sources, and
a relatively stable exchange rate. After 2007, this performance came under
pressure from external price shocks. The rise in the import prices of
petroleum, raw materials and other manufactured goods has the potential
to reduce the country’s growth performance, impacting the competitiveness
of the economy and threatening the gains achieved during past years. We
integrate a computable general equilibrium (CGE) model with a
microsimulation model to study the effects of changes in foreign savings
and import prices faced by Pakistan. An increase in foreign savings leads
to an increase in imports and a decrease in exports. The main sectors
facing a decline in exports are textiles, leather, cement, and livestock. In
this simulation food and oil prices decline and the factors of production
that gain are agricultural wage labor and nonagricultural unskilled wage
labor. The increase in import prices of petroleum or industrial raw
material leads to a reduction in exports. In this simulation the crop sector
is negatively impacted and returns to land and profits to farm owners
increase, showing a change in favor of agricultural asset owners, while
poverty and inequality increase.
KEYWORDS:
Microsimulation,
computable general equilibrium,
poverty,
inequality,
balance of payments,
Pakistan.
JEL:
I32,
C51,
C81,
D58,
C82,
H22.
Development of Supply and Demand Functions of Pakistan’s Wheat Crop
Muhammad Zulfiqar and Anwar F. Chishti
Published:Jan - June 2010
A simultaneous-equations model was used to capture the supply and
demand functions for Pakistan’s wheat sector at the national level. This
model reflects the fact that Pakistan’s domestic wheat supply is priceresponsive
and positively affected by the use of nutrient fertilizers. While
price appears to be a statistically significant factor on the supply side, it is
statistically insignificant on the demand side. Population size appears to be
very significant in determining wheat demand. The wheat import supply
seems to be influenced by the current world wheat price, current world
wheat supplies, Pakistan’s domestic consumption in previous years, and
domestic supply in previous years. We recommend that policymakers allow
market forces to play a role in the wheat economy in a way that protects
producers from adverse market conditions. The availability of various
nutrient fertilizers should be central to policies on future inputs use. Work
is also needed on wheat alternatives so that the country’s dependence on
wheat is eased as much as possible.
KEYWORDS:
Wheat,
supply and demand,
Pakistan.
JEL:
Q11,
C59.
Reaction of Stock Prices to Dividend Announcements and Market Efficiency in Pakistan
Muhammad Akbar and Humayun Habib Baig
Published:Jan - June 2010
This study tests the semi-strong form of market efficiency by
investigating the reaction of stock prices to dividend announcements. It
analyzes cash, stock, and simultaneous cash and stock dividend
announcements of 79 companies listed on the Karachi Stock Exchange from
July 2004 to June 2007. Abnormal returns from the market model are
evaluated for statistical significance using the t-test and Wilcoxon Signed
Rank Test. The findings suggest negligible abnormal returns for cash
dividend announcements. However, the average abnormal and cumulative
average abnormal returns for stock and simultaneous cash and stock
dividend announcements are mostly positive and statistically significant.
KEYWORDS:
Stock prices,
market efficiency,
dividend announcements,
Pakistan.
JEL:
G14.
The Role of Satellite Stock Exchanges: A Case Study of the Lahore Stock Exchange
Jamshed Y. Uppal
Published:July - Dec 2009
In many countries, capital markets are often served by multiple stock exchanges, typically with one national or dominant exchange and several regional or satellite exchanges. While multiple exchanges create a competitive landscape, they also lead to fragmented liquidity and diseconomies in operations. This paper examines the role of the Lahore Stock Exchange (LSE) in comparison with the country’s dominant exchange, the Karachi Stock Exchange (KSE), in four areas: (i) market efficiency in processing information, (ii) transaction costs, (iii) contribution to price discovery, and (iv) market integration. A comparative analysis of the exchange performance indicates the two exchanges to be at par in terms of informational efficiency and transaction costs. There is evidence of informational linkages and interdependencies between the two exchanges; the LSE appears to contribute to price discovery and competes to an appreciable extent. Against the background of proposals to merge the country’s three stock exchanges, a major consideration in evaluating public policy is the relative performance of the LSE and its viability as an effective competitor. Eliminating inter-exchange competition by merging the stock exchanges is predicted to lead to higher transaction costs, lower incentives for regulatory compliance, and diminished motivation for promoting capital market development.
KEYWORDS:
Stock exchange,
demutualization,
market efficiency,
transaction costs,
price discovery,
market integration,
dually listed stocks,
satellite and dominant exchanges.
JEL:
G15,
G14,
G38.
Trade and Income Convergence in Selected South Asian Countries and Their Trading Partners
Ahmed Nawaz Hakro and Bashir Ahmad Fida
Published:July - Dec 2009
This paper analyzes trade among and the convergence of per capita income for India, Pakistan, Bangladesh, and Sri Lanka. The extent of trade and its relationship with the magnitude of income convergence is studied among these countries and their trading partners. We use intra-trade convergence and the difference-in-differences approach for the estimations. The results demonstrate that an increase in trade between the groups decreases the per capita income differential. Our results suggest that trade liberalization policies could be effective in achieving convergence. More importantly, we find that the per capita income of our source countries converged more rapidly under post-liberalization regimes than pre-liberalization regimes.
KEYWORDS:
Intra-trade,
income convergence,
per capita income,
South Asia.
JEL:
C21.
An Analysis of Host Country Characteristics that Determine FDI in Developing Countries: Recent Panel Data Evidence
Muhammad Tariq Majeed and Eatzaz Ahmad
Published:July - Dec 2009
This paper analyzes a range of host country characteristics that determine foreign direct investment (FDI) flows to developing countries, using panel data on 72 countries for the period 1970-2008. Keeping in view the endogeneity problem of the chosen host country’s characteristics, the model is estimated using the General Method of Moments (GMM) technique. The analysis shows that gross domestic product (GDP), economic growth, and per capita income positively affect FDI—a result consistent with the market-seeking behavior of multinational corporations (MNCs). Furthermore, we find that remittances have a significant and positive impact on FDI. On the other hand, inflation and the balance of payments deficit have negative effects on FDI. MNCs are attracted to host countries that are outward looking and follow trade-promoting policies. This is confirmed by the positive effect of openness on FDI flows to developing countries. The study also finds that the effect of military expenditures on FDI is negative and significant. Finally, our analysis finds that the real exchange rate has a significantly negative impact on FDI.
KEYWORDS:
Investment,
panel data,
developing countries,
FDI,
GMM.
JEL:
F21.
An Efficiency Analysis of Punjab’s Cotton-Wheat System
M. Ishaq Javed, Sultan Ali Adil, Sarfaraz Hassan, and Asghar Ali
Published:July - Dec 2009
This study examines the technical, allocative, and economic efficiencies of the cotton-wheat farming system in Punjab, Pakistan. It also investigates the determinants of these efficiencies using a non-parametric data envelopment analysis (DEA) technique. Technical, allocative, and economic inefficiency scores are separately regressed on socioeconomic and farm-specific variables to identify the sources of inefficiency using a Tobit regression model. The mean technical, allocative, and economic efficiencies calculated for the system were 0.87, 0.44, and 0.37, respectively. Our results indicate that years of schooling and the number of contacts with extension agents have a negative impact on the inefficiency of cotton-wheat farming in Punjab.
KEYWORDS:
Cotton,
wheat,
economic efficiency,
data envelopment analysis.
JEL:
D61,
C14.