Dynamic Relationship Between Imports and Economic Growth in Pakistan

Abstract

This research paper examines the causal relationship between imports and economic growth along with the impact of economic growth on imports in the perspective of Pakistan using the Granger causality test and simple regression test. The research aims to evaluate the relationship between the respective variables by using the data for a period of 40 years from 1975 to 2014. The result revealed that there is a causal relationship between imports and economic growth and found the evidence of bi-directional causality between imports and economic growth in Pakistan. Similarly, the result showed that there is a significant causal relationship between economic growth and imports in Pakistan. On the basis of Granger’s causality test, the positive and significant relationship between the respective variables reflects that imports of capital goods such as machinery group, chemicals, equipment, etc. translate in to the economic productivity and growth along with the imports of consumer goods that also contributes towards the export oriented productivity indirectly. For further research, the right mix of the categories and products should be examined to accelerate the pace of economic growth through imports in Pakistan. Keywords: Import, Economic Growth, Granger Causality, Bi-directional, Causal Relationship DOI : 10.7176/JESD/10-10-08 Publication date :May 31 st 2019