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Priced Separation and Supply-Price Specification of Exports: Evidence from Pakistan
Mohammad Afzal
Published:Jan - June 2002
Empirical studies of international trade have concentrated on singleequation models to analyse the demand relationship for imports and exports
[Houthakker and Magee (1969). Naqvi et al (1983), Bnhmani-Oskooee
(1984,1986)]. These studies have assumed that the imports and exports price
elasticities facing any individual country are infinite or at least large. The
assumption of infinite supply price elasticity may be acceptable for the world
supply of imports to a single country. Export demand and supply functions
have been estimated in a simultaneous equation framework by Khan (1974),
Goldstein and Khan (1978). Dunlevy (1980), Arize (1986.1988). Balassa et al
[1989]. Anwar (1985), and Khan and Saqib (1993)] for both developed and
underdeveloped countries.
Haynes and Stone (1983) argue that previous studies failed to
estimate the supply behaviour of both imports and exports not only because
of a simultaneity bias but also because quantity rather than price were
specified as the dependent variable. They have, based on the evidence of
USA and UK trade data for the period 1947-79, found support for a
dynamic supply- price model for both exports and imports and no evidence
to support dynamic supply-quantity specification for these countries.
KEYWORDS:
Pakistan, exports, supply-price, priced separation, import and export behaviour.
JEL:
N/A.
Impact of Foreign Aid on Fiscal Behaviour: A Case Study of Pakistan (1980-2000)
Salman Ahmad
Published:Jan - June 2002
Economists have been trying to study the linkages between aid
inflow and government activities in developing countries. With the passage
of time, the analysis has become more sophisticated. The development of
two-gap models [for example, Chenery and Bruno(1962); and Chenery and
Adelman(1966), among others] was an important contribution to the
literature. More recently, two-gap models have been extended into threegap models. Iqbal (1995) added a fiscal constraint to the traditional saving
and foreign exchange gap. In such cases, the fiscal constraint is intended to
reflect potential limitations to finance public investment that may be
required to support a given level of output.
Another development is the analysis of effectiveness of foreign aid
on the fiscal behaviour of governments in underdeveloped countries.
Empirical studies by Khilji and Zampelli(1991), Khan and Hoshino(1992),
among others are important contributions to this topic. All these studies
gave conflicting conclusions about the effectiveness of assistance in terms of
fiscal behaviour. Generally, these studies prove that aid reduces the taxation
effort and is substituted between public investment and public
consumption.
KEYWORDS:
Pakistan, aid inflow, foreign aid, fiscal behaviour.
JEL:
N/A.
Sustainable Development through Science and Technology
Tariq Husain
Published:Jan - June 2002
After 50 years of nationhood, about 60 million Pakistani citizens still
live in absolute poverty which is a condition so debasing that it robs the
poor of the very potential of their genes. Illiteracy, malnutrition, high
maternal, child and infant mortality afflict more than 50% of Pakistan’s
population of 144 million. Due to mismanagement of its human and natural
resources Pakistan is in a vicious cycle of economic dependence (Figures 2 &
3) with high indebtedness, low growth rates of exports and GDP and a
decaying education system. During the last two decades Pakistan has
engaged in firefighting through external debt re-schedulings and increasing
its dependence on the Bretton Woods institutions (World Bank,
International Monetary Fund) and their richer shareholders. As a result the
important development needs of the nation’s human capital have been
grossly neglected. It has failed to develop its human capital, particularly its
domestic scientific and engineering communities and thus is not ready to
meet the growth challenges of the 21st century. It is postulated that Pakistan
must, on a crash basis, develop a domestic scientific and technology (S&T)
community and create a scientific infrastructure if it seeks to become
economically and politically self-reliant. With about 100 scientists/engineers
for a million population, Pakistan’s current S&T capacity is woefully
inadequate to be able to capitalize on the wealth of opportunities that are
becoming available through globalization. The S&T capacities of Pakistan’s
competitors in the world marketplace are significantly higher (300 per
million for India; 600 per million for China; 2,600 per million for Korea).
Pakistan needs both enhanced S&T capacity and the associated education
system if it is to increase the “science-cum-knowledge content” of its exports
and GDP. This is a sine qua non for achieving expanded economic well being for its citizens and providing the wherewithal for ensuring their
security from internal and external threats. Not doing so will leave Pakistan
at the bottom of the country league table in terms of poverty, security and
even liberty. This is a future that Pakistan should not have.
KEYWORDS:
Sustainable development, economic independence, Pakistan, science and technology.
JEL:
N/A.
Book Reviews: The Informal Sector In the Urban Economy: Low Income Housing In Lahore
Nabeel Ashraf and Waleed Mohsin
Published:Jan - June 2002
Imtiaz Alvi, The Informal Sector In Urban Economy: Low Income Housing
In Lahore, OUP, Karachi, 1997.pps 323. Price Rs. (Pakistani) 535/-.
Cities play an increasingly important role in the economic standing
of nations. Urban areas, with their anonymity and fast pace, can be nonconducive to societal cooperation. Social capital and trust are more difficult
to develop and sustain in large groups. In many cases, interactions between
parties are not repeated and therefore there is no incentive to develop
reciprocal relations.
In urban settings, people tend to cluster together in small
communities and networks of support, but trust and goodwill for those
outside immediate groups is minimal. High levels of intra-group social
capital and very little inter-group social capital (referred to as "bridging
social capital") may have profound effects on inequality, private sector
development, government and public welfare.
KEYWORDS:
Book review, Pakistan, Lahore, informal sector, low-income, local institutions, capacity.
JEL:
N/A.
Book Reviews: Structural Adjustment, Theory, practice and impacts
Nina Gera
Published:Jan - June 2002
Giles Mohan, Ed Brown, Bob Milward and Alfred B. Zack-Williams,
Structural Adjustment, Theory, practice and impacts, Routledge, London
and New York, 2000, 215 pps, Price not mentioned.
This book touches on almost each and every aspect of the extremely
topical subject of structural adjustment, delving into the whys and
wherefores, the rights and wrongs of the issue. Despite the somewhat
technical nature of the subject, it reads more like a narrative. Yet because
to my mind it is virtually a masterpiece and one of its kind, it should in fact
be read in bits and pieces rather than in one go.
KEYWORDS:
Book review, structural adjustment, neo-liberalism, poverty alleviation.
JEL:
N/A.
Poverty Reduction and Human Development: Issues and Strategy
Muhammad Aslam Khan
Published:July - Dec 2001
The paper assesses trends in poverty and improvements in the
material conditions of life of millions of people living in poverty and
human deprivation. It discusses the growth and poverty dimensions and
associated structural problems. Determinants of poverty in Pakistan are
discussed with a view to identify areas of intervention and public policies.
Poverty reduction and human development programmes are discussed to
show that pumping financial resources to address the issue of poverty is not
a correct strategy for poverty reduction and human resource development.
The paper discusses the poverty reduction strategy to assess government
commitment to poverty reduction and human resource development in a
sustainable manner. It concludes that poverty reduction and human
development in Pakistan is dependent on many factors particularly the
strengthening of institutional capacity and availability of human and
financial resources.
KEYWORDS:
Pakistan, poverty reduction, human development, determinants, interventions, public policies, social indicators.
JEL:
N/A.
Published:July - Dec 2001
The last 10 to 20 years have seen a rapid rise of a new school
in Macroeconomics. One of the most interesting
characteristics of this school is its use of non-econometric
methods for predicting and calculating various variables of the
economy. If traditional econometrics has lost some of the force
it has had for decades, it is of interest to analyse the merits of
the new system replacing it. Most importantly, it is of interest
to study the methodological justification of this new system
and the paradigm it rests on. The latter is the main purpose of
this paper.
KEYWORDS:
Macroeconomics, neoclassicism, dynamic programming.
JEL:
N/A.
A Measure of the Elasticity of Substitution in the Manufacturing Sector of Pakistan
Rukhsana Kalim
Published:July - Dec 2001
From a technological perspective, the paper is mainly concerned with
finding the employment potential in different groups of industries of Pakistan.
The role of factor prices in determining techniques of production in the
industrial sector through elasticity of substitution has been analysed. Besides
taking the large-scale manufacturing sector as a whole, three broad categories
of industries viz., consumer goods, intermediate goods and capital goods
industries has been selected in particular for the empirical analysis. By utilising
the OLS technique, the cross-section analysis for the year 1995-96 has been
made. Our results indicate the there is great potential for employment in the
intermediate and capital goods industries provided there are no factor price
distortions in the economy.
KEYWORDS:
capital goods, empirical analysis, industries of Pakistan.
JEL:
N/A.
A Study on Saving Functions for Pakistan: The Use and Limitations of Econometric Methods
Aqdas Ali Kazmi
Published:July - Dec 2001
The econometric estimates of saving functions for Pakistan covering
the period 1960-88 are presented and examined in this study. The choice of
this period for analytical purposes was necessitated by the availability of
consistent time series data on numerous microeconomic and macroeconomic
variables required for estimating a wide range of econometric models of
saving behaviour. The study is divided into nine sections. The introduction
and the basic issues for estimating saving functions are outlined in Section
1. Section 2 delineates Sectoral Accounting Framework for defining the
inter-relationship between the main components of savings, investment and
national income. Section 3 outlines the econometric methods, the nature of
variables used and the basic saving functions for Pakistan. Section 4 deals
with the important hypotheses about private sector saving behaviour and
estimates of the related saving functions. The basic rationale and estimation
of public saving functions have been taken up in Section 5, while the results
of foreign savings functions are presented in Section 6. The model
specification and estimation of domestic saving functions and national saving
functions are covered in Section 7 and Section 8 respectively. The
conclusions and limitations of the study are briefly discussed in Section 9.
KEYWORDS:
Pakistan, employment potential, policy, employment, elasticity of substitution.
JEL:
N/A.
Published:July - Dec 2001
Economic growth requires investment goods that may either be
provided domestically or be purchased from abroad. Domestic provision
requires saving; the foreign provision requires foreign exchange. If some
investment goods for growth can only be provided from abroad, there is
always a minimum amount of foreign exchange required to sustain the
growth process. The distinctive contribution of the dual-gap analysis to
development theory is that if foreign exchange is the dominant constraint it
points to the dual role of foreign borrowing in supplementing not only
deficient domestic saving but also foreign exchange. The Dual-gap theory
thus performs the valuable service of emphasising the role of imports and
foreign exchange in the development process. It synthesises traditional and
more modern views concerning aid, trade and development. On the one
hand, it embraces the traditional view of foreign assistance as merely a boost
to domestic saving; on the other hand, it takes a more modern view that
many goods necessary for growth cannot be produced by the developing
countries themselves and must therefore be imported with the aid of foreign
assistance. Indeed, if foreign exchange is the dominant constraint, it can be
argued that dual-gap analysis also presents a more relevant theory of trade
for developing countries which justifies protection and import substitution.
If growth is constrained by a lack of foreign exchange, free trade cannot
guarantee simultaneous internal and external equilibrium, and the gains
from trade may be offset by the underutilisation of domestic resources.
KEYWORDS:
Domestic provision, Pakistan, economic growth, Dual-gap theory, foreign assistance.
JEL:
N/A.