The impact of openness on economic growth:
A case study of Pakistan
The globalization consists of a set of policies which includes free financial liberalization, privatization, and foreign investment and reduced public expenditures. The share of import in GDP measures openness. The new growth theory describe that increasing openness has positive impact on economic growth.
In this study, we will see the impact of globalization and openness on economic growth by using the data of Pakistan and also the empirical evidence or validity of new growth theory.
We will employ the yearly data ranging from1973-2010 of Pakistan from international financial statistic and World Development indicators and economic survey of Pakistan.
We will measure openness by taking the share of import in GDP and globalization by import plus export as a share of GDP.
First of all we will test the unit root of following traditional and non traditional test.
1. By plotting the series
2. Augmented Dicky fuller test
3. Philips person test
4. KPSS test
* If all the series are integrated at level(i-e I(o)) then we apply OLS
* If all the series are integrated at first difference then we will apply co integration test.
* If all the series are integrated at different levels then we will apply ARDL.
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