An Empirical Analysis Of Pakistan's Trade Balance

Abstract

This research has mainly focused upon trade balance for the time period 1980 to 2020. The time series data is used for said period. Here data is found stationary on the basis of Augmented Dicky Fuller (ADF) test, and Philips Peron (PP) unit root test. The trade balance is impacted positively by GDP and infrastructure while it is negatively impacted by domestic consumption, exchange rate and inflation. The short run and long run analysis is done on the basis of ECM and co-integration. Error Correction Mechanism (ECM) is applied to analyze short run relationship. The lagged value of the Error Correction Term (ECMt-1) is negative and significant at 1% level of significance. The co-integration tells that all the variables are integrated.