Does Trade Openness Boost Economic Activity Rate? A Case Study of Pakistan

Abstract

The focal intension of the study was to examine the impact of Trade Openness (TO) on Economic Activity Rate (LFPR) in Pakistan, during the time period of 1980-2013. Data on all variables is collected from WDI. LFPR is dependent variable and TO is independent variable while PCI, Health, and FDI are included in model because they can effect LFPR. Time Series data is used and after checking stationarity through unit root test VAR model used for empirical analysis. The results show that all variables are significant. The main independent variable (TO) is positively related with LFPR. PCI and Health is also positively related with LFPR but FDI shows negative relationship with LFPR due to other factors. Based on the empirical analysis study suggest that trade openness policies are beneficial for Pakistan.