Non-Linear Export Instability and Economic Growth: A case of Pakistan

Abstract

Exports are considered the driver of economic growth by making the balance of payments favourable through foreign exchange earnings. Export instability refers to the uncertainty about export earnings in the economy. These uncertainties bring a significant impact on the economic behaviour, investment ability and, in turn, hurt economic growth. The focus of the study is to probe the impact of export instability on economic growth in Pakistan. Design/methodology/approach: Time series data is used from 1980-2019. Non-linear ARDL technique is applied for short run and long run results. Findings: It concludes that economic growth in Pakistan is positively related to gross fixed capital formation and labour force, whereas it is negatively related to the consumer price index. While export instability follows an inverted U shape. Hence policymakers need to form a threshold within which the export instability is favourable. Originality/value: This study is instrumental in exploring the non linear effect of export instability on economic growth which is helpful in determining the upper and lower limit of export volume deviations beyond which growth may hamper