gender differential paper IJCRB

ijcrb.webs.com
JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
be significant in showing whether economic development is affected by openness as
measured by exports or imports.
One of the principle components of economic reforms in Pakistan is import liberalization.
The empirical studies generally concentrate on export promotion as the ultimate objective of
liberalization with lesser emphasis on the role of import sector in promoting economic
growth. As Pakistan is now passing through the phase of growth, imports are crucial for
attaining development goals.
Imports play an important role in the growth process. Import is the source of raw materials
not available domestically as well as technology and capital goods for raising productive
capacity of the economy. Imports also help in generating economic efficiency as well as
price stability (Shirazi and Manap, 2004). Aim of the import liberalization is to promote
rapid economic growth through growth of export sector. The positive relationship between
liberalization and growth is empirically well established (Frankel and Romer, 1999).
Aggregate imports of a country depend upon a large number of factors like size and growth
rate of gross domestic product, relative prices of imports, foreign exchange reserves etc. At
disaggregate level, the various categories of imports also depend upon their domestic
production. One way of looking at relationship between imports and growth is to investigate
their causal relationship. Furthermore, exports can provide foreign exchange that allows for
more imports of intermediate goods which in turn raises capital formation and thus stimulate
output growth.
The import-led growth (ILG) suggests that economic growth could be driven primarily by
growth in imports. Endogenous growth models show that imports can be a channel for longrun
economic growth because it provides domestic firms with access to needed intermediate
factors and foreign technology (Coe and Helpman, 1995). Growth in imports can serve as a
medium for the transfer of growth-enhancing foreign R&D knowledge from developed to
developing countries (Lawrence and Weinstein, 1999; Mazumdar, 2000).
The import-led growth hypothesis advanced by Hanson (1982) suggests imports are
important source of economic growth. According to the model that generates this hypothesis,
a socialist economy first imports capital goods and develops industrial infrastructure and then
promotes economic growth. That is, the amount of capital goods that a socialist country can
import limits its achievable rate of economic growth.
2. Literature Review
Many researchers investigated the causal relationship between macro aggregate like exports
and growth, exports and imports and other macro variables of trade liberalization and growth.
Afxentiou and Serletis (2000) examined the causality between the growth in GNP and
exports, as well as GNP growth rate and imports with the help of Granger Causality test. The
sample of fifty developing countries was considered over the period of 1970 to 1993. An
overall conclusion, which emerged from the study was that for a comprehensive sample of
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