Estimated Export Demand and Supply Functions for Pakistan: A Disaggregated Analysis

Abstract

This study estimates the impact of demand and supply side factors on the export performance of Pakistan. Using unrestricted autoregressive distributed lag (ARDL) model for the period 1971 to 2015, the study analyzes export performance using data both at aggregate and disaggregate levels. The study finds, firstly, that exports are elastic to changes in world income and relative export price at the aggregate level. Secondly, at a disaggregate level, only exports of manufactured goods, leather and cotton cloth are elastic with respect to world income. Similarly, demand for all export categories is inelastic to changes in relative export price. On the supply side, exports at both aggregate and disaggregate levels are significantly elastic to changes in domestic production capacity and relative price. The study concludes that demand and supply side factors are equally important in explaining the export behavior at the aggregate level, whereas at a disaggregated level, the supply side factors exercise relatively high impact on export performance.