This paper provides a survey of the theoretical and empirical literature relating to industrial clusters. These clusters are groups of firms that are specialized by sector, located in close geographic proximity and consist of mostly small and medium sized enterprises. The benefits to firms from clustering are sometimes referred to as active and passive collective efficiency. Passive collective efficiency refers to benefits accruing to a firm by virtue of being in a cluster, such as access to markets and skilled labor, technological spillovers, flexible specialization, and reduced transaction costs. Active collective efficiency, on the other hand, stems from purposeful cooperation between clustered firms to undertake a large-scale project to upgrade production, such as entering into product marketing.
KEYWORDS: Industrial clusters, SMEs, transaction costs, passive, active, collective efficiency.

JEL: N/A.

Most behavioral sciences based on rationality have simplistic assumptions; and the same is true about consumption or investment decisions. The aim of such studies is to maximize either utility or wealth. The entire ‘financial economics’ theory revolves around an investor who wants to maximize his return at some given level of risk. To determine the optimal return at a given level of risk or an optimal risk for a given level of return has been widely discussed in the financial literature consequently raising the issue of asset pricing in financial markets.
KEYWORDS: Asset pricing, CAPM, financial literature, review.

JEL: N/A.

In a globalized world in which the structures of the financial service industries are changing rapidly and becoming more and more competitive, the cost efficiency of financial institutions along with better quality of service have assumed crucial significance for their long-term sustainability. Hence, the nature of efficiency of financial institutions will determine the prospects of their success in meeting the challenges of a globalized world. The commercial banks in Pakistan are also facing the challenges of increased competition from foreign commercial banks while their operations over the years have also been called into question. However, the literature, which deals with questions of cost efficiency of commercial banks in Pakistan in a professional manner is scant. The information on relative technical efficiency of commercial banks, if available, can be helpful in designing policy for this important sector.
KEYWORDS: Financial institutions, Pakistan, commercial banks, sustainability, banking sector.

JEL: N/A.

The purpose of this study is to test the efficiency of the Turkish Markets in terms of the monthly inflation announcement effect. The study examines the reaction of the financial services sector to monthly inflation announcements, particularly, in case of unexpectedly low or high levels of inflation. Strong evidence emerges that the Turkish financial services sector does not react significantly to the announcements that are in line with the expectations. In other words, the cumulative abnormal returns around such inflation announcements are not significantly different from 0. The results of the robustness tests for no news, indicate that the t-statistics calculated by means of the Moving Average Approach are insignificant for the sector, which is in line with the results of the original approach. The results of the two robustness tests are found to be supporting the original findings of the adaptive approach.
KEYWORDS: Abnormal Returns (ARs), Cumulative Abnormal Returns (CARs), effects of macroeconomic announcements.

JEL: N/A.

In this paper we investigate both the long and short-run relationship between real money balances, real income, inflation rate, foreign interest rate and real effective exchange rate with reference to Pakistan over the period 1982Q2-2002Q4 using ARDL approach which is a newly developed econometric technique. The estimated results indicate that in the long-run real income, inflation rate, foreign interest rate and real effective exchange rate have a significant impact on real money balances in Pakistan. The dynamics of real money demand show that the effects of rate of inflation, foreign interest rate and the real effective exchange rate are much smaller in the short run than long run. The results also reveal that the demand for real money balances in Pakistan is stable, despite the economic reforms pursued by the government since the late 1980s.
KEYWORDS: Pakistan, ARDL, exchange rates, monetary policy.

JEL: N/A.

This study was conducted to analyze the comparative advantage and competitiveness of wheat crop and its implications for resource allocation towards competing crops. The extent of policy distortion and agricultural protection was also determined by the study. The data were collected from APCom on cost of production of wheat crop over the three year period (2001-2003). Two main provinces contributing towards wheat production i.e. Punjab and Sindh were selected as the sample. This data were then averaged to obtain a national scenario. The crop budgets were prepared initially in financial terms and later on economic prices were utilized to evaluate the comparative advantage and competitiveness of the wheat crop. The Policy Analysis Matrix (PAM) was selected as the analytical framework. The policy distortions were measured through Nominal Protection Coefficient (NPC) and Effective Protection Coefficient (EPC). The Domestic Resource Cost ratio (DRC) was selected as a measuring tool for comparative advantage. Keeping in view the importance of wheat in the economy, the analysis was conducted in two price regimes i.e. import and export parity prices. The analysis results showed that at import parity price Pakistan has a comparative advantage in the production of wheat only as an import substitution crop. At export parity price, Pakistan is not competitive in the world wheat market and has no comparative advantage in wheat production.
KEYWORDS: PAM, Pakistan, NPC, DRC, EPC, wheat crop.

JEL: N/A.

In September 1997, the World Bank formally began its anti-corruption initiatives by adopting a series of official guidelines and policy statements to aid in anti-corruption strategies. One of the main areas of focus is international trade. According to World Bank (1997), the areas in which corruption is most often found is in, “customs and tax departments, social security agencies, land titling and environment agencies administering regulations and issuing licenses, public works departments and other agencies involved in significant public procurement, police and judiciary, and privatization agencies.” In particular, trade policies can be susceptible to corruption, even though many countries have successfully managed trade policies to promote industrialization. This susceptibility of trade policies to corruption is because they involve allocations made by the authorities on discretionary rather than efficiency bases. Examples of this are the discretionary actions of customs officials, the administrative actions of the authorities in the allocation of import licenses and foreign exchange, and bribery involved in maintaining high rates of tariffs.
KEYWORDS: World Bank, anti-corruption strategies, international trade.

JEL: N/A.

Pakistan was one of the few developing countries that had achieved an average growth rate of over 5 percent over a four decade period ending in 1990. Consequently, the incidence of poverty had declined from 40 percent to 18 percent by the end of 1980s. But the 1990s proved to be a lost decade for Pakistan; growth in per capita income dropped to slightly over 1 percent. Poverty resurfaced and about one-third of the population now lives below the poverty line of $1 per day. Social indicators became worse than those of other countries with comparable incomes. The country became one of the heavily indebted countries and was declared as one of the most corrupt countries in 1996. The challenge facing the government which assumed power in October 1999 was to put the economy back to its pre-1990 track.
KEYWORDS: Pakistan, economy, developing countries, growth rate.

JEL: N/A.

Despite impressive macroeconomic indicators, Pakistan’s economy has not shown the kind of investment and employment generation performance which is required to move the country on to a growth trajectory which will mean significant reduction in poverty levels and substantial improvement in its social indicators.
KEYWORDS: Pakistan, private investment, economic growth, macroeconomic indicators.

JEL: N/A.

It is remarkable that from a situation of default and unsustainable fiscal and balance of payments deficit only a few years back, Pakistan has come out of the debt trap, balance of payments turned surplus1, and fiscal deficit has declined below 4 percent of GDP. However, sharp increase in the inflation rate, widening trade deficit and re-emergence of balance of payments deficit in the current year are quite worrisome. With the widening of the balance of payments deficit and the possibility that fiscal deficit may start rising as the government provides for the higher levels of public expenditure, would the debt problem not emerge once again? Bilquees (2003) has examined the growth of debt over the 1980-81 to 2002-03 period by de-composing the effect of primary deficit, interest rates and exchange rate adjustments. She argues that primary deficits are basic to the growth of debt. Higher government public expenditure compared to its resources leads to higher domestic as well as external borrowings. The external borrowing with limited repayment capacity results in exchange rate depreciation with consequent implications for the debt. The differential between interest rates and growth of GDP also have implications for the debt but in Pakistan it did not result in rising debt ratio because the interest rates have always remained lower than the growth rate.
KEYWORDS: GDP, debt, debt trap, payment, surplus.

JEL: N/A.

“Pakistan’s investment in its people today not only falls below any decent concept of national governance; we are simply not preparing the nation for technological challenges of the 21st century. Where do we start in such a wasteland of human neglect? The situation cannot be reversed overnight. It would require considerable investment in human development over a fairly long period of time.” Dr. Mahbubul Haq: A National Agenda: Critical Choices for Pakistan's Future: 1993 According to the traditional view in the development debate of the 1960s, land, labor and capital were identified as the main factors of production and within these the focus was on expanding capital by increasing investment to at least 15 percent of GDP to achieve a growth rate of at least 5 percent.
KEYWORDS: Pakistan, development, education.

JEL: N/A.

The experience of the State Bank of Pakistan (SBP) in conducting the monetary policy of the country over the years comprises a whole range of regimes. While the overall objectives of monetary policy have remained the same, policy contents – intermediate targets, choice of instruments and controls etc. – have varied considerably over the years.
KEYWORDS: Pakistan, SBP, inflation, economic growth, monetary policy.

JEL: N/A.

In the heyday of the five year plans in Pakistan, the common expressions for the officials dealing with the economy and their institutional affiliations were “planners” and “planning machinery.” The fiscal crisis of the state and the consequent installation of regimes of stabilization, structural adjustment and reform gave birth to usages such as “economic manager,” “economic management” and “economic team.” It has also marked a shift from the long and medium-term to the near-and short-term. This paper, however, adheres to the broader view of the management of the economy and its institutions taken by Anmad and Amjad in the eighties. According to them, “National economic management is a new but growing science. The developing world's experience of the recent decades underlines the fact that economic and social progress is an induced process. Governments are not only called upon to initiate the development process but are also required to influence its composition, pace, tone, and direction through an appropriate policy-mix. A consistent framework encompassing various policies within the bounds of an overall national strategy needs to be worked out by the national policy-makers.” These authors also pointed out that there was a gap between the increasing requirements of management and the capabilities of individuals and institutions. “Economic management has thus become a critical area for study as well as introspection.”1
KEYWORDS: Pakistan, economy, institutional machinery, institutions, national economic management.

JEL: N/A.

Despite some slight improvement in the last two years the overall employment and labor market situation continues to give rise to serious concern and needs to be given the highest attention in economic and social policy making in Pakistan. The rise in unemployment rate from around 3 per cent in the early 1990s to around 8 per cent in recent years in a country where few people can afford not to work for a lack of any effective safety net, reflects the emergence of a serious imbalance in the labor market. This more than doubling of the unemployed from around 1 million in 1990 to around 3.5 million in 2003-04 has been, as we shall argue, a major contributory factor in the rise in poverty during the 1990s. The severity of the employment problem is reflected in the fact that unemployment in recent years has been higher amongst the poor than the non-poor in the labor force.
KEYWORDS: Poverty reduction, employment, Pakistan, labor market, unemployment.

JEL: N/A.

In our environment governance usually means law and order but in its broadest sense it means thinking about ‘how to steer the economy and society, and how to reach collective goals’. Multinational institutions hold seminars on governance but carefully avoid discussions impinging on the third world scale’s sovereignty; they focus instead on administrative reform, decentralization, elimination of red tape and corruption. But governance has other ramifications that must be considered. Unless a state does a whole array of things to position itself appropriately, it cannot hope to have good governance1.
KEYWORDS: Governance, Pakistan, reform, bureaucracy, administration.

JEL: N/A.

At the start of the 21st century, almost one-fifth of humanity-1.2 billion people-live on less than a dollar a day. Pakistan is confronted by a multifaceted dilemma. The major issues facing the country are poverty and income disparity, particularly among the rural segments of the society. And evidence indicates that both have worsened. The impact of poverty is particularly acute on the most vulnerable sections of the society. In the year 1990-91, 39.42 percent of the total 31.81 percent of the population below the poverty line were termed as absolute poor including 34 percent chronically and 61 percent extremely poor. During the last decade or so, nearly 2 million people are added to the clusters of extremely poor, 5 million to chronically poor, 7 million to transient poor. Thus bringing nearly 59.11 percent of the poor population out of poverty is to a certain extent easier than bringing the remaining 40.89 percent out of the poverty trap. Pakistan has witnessed a decline in the growth rate from 6.1 per cent during the 1980s to 4.2 percent during the 1990s. However, the Poverty Equivalent Growth Rate (PEGR) analysis reported in this paper indicates that the pro-poor growth scenario is improving in rural Pakistan. If growth remains pro-poor in the subsequent years as it was in the year 2000-01, there is a likelihood that the growth will trickle down to the poor more than the non-poor. Punjab province also showed an improving trend in terms of pro-poor growth in the analysis. In order to improve PEGR, the poverty alleviation policy must be accompanied by rational income distribution.
KEYWORDS: Poverty, alleviation, Pakistan, population, PEGR analysis, growth.

JEL: N/A.

In developing countries, children have long been largely ignored in public policy-making and the development of program strategies for improving their welfare. The complex issue of child labor is a developmental issue worth investigating. The notion that children are being exploited and forced into labor, while not receiving education crucial to development, concerns many people. This study focuses on child labor in Pakistan with two main objectives. We first estimate the prevalence of child labor in the 100 districts of Pakistan and then examine the hypothesis that child labor is significantly higher in districts that have a higher incidence of poverty and lower level of educational attainment. The results show that child labor has a negative relationship with the literacy rate both 10-14 year age and 15 years and above. There is a negative but insignificant relationship with per capita income and Deprivation Index in the case of male child labor. The study proved that literacy rate and per capita income has influenced negatively on female child labor.
KEYWORDS: Child Labor, poverty, unemployment, education, literacy.

JEL: N/A.

This article aims at explaining the financial crises Turkey experienced in the last decade through a random effects logit model which incorporates 26 macroeconomic, political, and financial sector variables. Evidence emerges that the only significant variables are current account/GDP, fiscal balance/GDP, GDP per capita, national savings growth, foreign exchange reserves, terms of trade, stock prices, and import growth. Results indicate that all variables have expected signs with the exception of import growth.
KEYWORDS: Logit models, financial crises, currency crises, emerging markets.

JEL: N/A.

Both single-equation models [Houthakar and Magee (1969), Naqvi et al (1983), Bahmani-Oskooee (1986)] and simultaneous equation models [Khan (1974), Goldstein and Khan (1978), Arize (1986), Balassa et al (1989), Anwar (1985) Khan and Saqib (1993) and Afzal (2001)] have been used to study export behavior in developed and underdeveloped countries. Goldstein and Khan [(1978)] have investigated the price responsiveness of export demand and export supply of eight industrial countries for the period 1955- 70 using both equilibrium and disequilibrium models. The studies on the behavior of Pakistan’s exports [Naqvi et al (1983), Anwar (1985), Khan and Saqib (1993) and Afzal (2001)] have not investigated the disequilibrium aspect of exports’ response
KEYWORDS: Export demand, equilibrium model, disequilibrium model, export behaviour, Pakistan, trade liberalization.

JEL: N/A.

According to the World Development Report 2000-2001 almost half of the world’s population – 2.8 billion out of 6 billion live on less than $2 a day; while a fifth, i.e., 1.2 billion live on less than $1 a day with 44 per cent of them living in South Asia.1 The Pakistan Economic Survey 2000-2001 reports that about 33 per cent of the country’s population is living below the food poverty line.2 Food poverty trends since 1990-91 shows that food poverty has been on the rise since 1990-91, with a higher increase being observed in rural areas where food poverty increased from a low of 22.5 per cent in 1992-93 to a high of 34.8 per cent in 1998-99 (Table-1). In Pakistan, a large share of the household budget is spent on food. Approximately half of the household consumption expenditure is used to meet the nutritional requirements of the household at the national level. In rural areas this proportion is about 54 per cent, while in urban areas it is 41 per cent3 (see Appendix Table-1). Despite such high proportions of consumption expenditure on food, the incidence of food poverty remained high, about one-third of households were living below the food poverty line and were not meeting their nutritional requirements
KEYWORDS: Pakistan, poverty, determinants, household consumption expenditure.

JEL: N/A.