Does Trade with China Can Make Growth in Pakistan More Inclusive? Pre and Post Empirical Impact of China-Pakistan Economic Corridor

Abstract

The main objective of this study is to analyze the impact of Pakistan trade relation with China, especially in the perspective of "China-Pakistan Economic Corridor" (CPEC), on the inclusive Growth in Pakistan. This study contains two phases. Phase-I elaborates the impact of Pakistan trade with China and its inclusive growth without the effect of CPEC during 1985 – 2017 by applying ARDL frame-work. The results of the study confirmed that the influence of Pakistan-trade with China and its impact on the inclusive growth of Pakistan is Positive and Significant. Granger Causality test also give robust evidence that the relationship between Pakistan trade with China enhances inclusive growth of Pakistan. Correspondingly, Phase-II, examined the impact of CPEC and Pakistan-trade with China on the inclusive growth of Pakistan during 1990 – 2017 by using Ordinary Least Square (OLS). The results argue that the Impact of CPEC and Trade volume of Pakistan with China encourages inclusive growth of Pakistan.  Beside the main variables, the control variable like, (foreign direct investment, government expenditure, financial development, trade openness and inflation) also positive and significant effect on inclusive growth but in some cases the impact is insignificant.

Keywords: Trade; Inclusive Growth; CPEC; ARDL; Pakistan.

DOI: 10.7176/DCS/9-3-05

Publication date:March 31^st 2019