Conceptual Framework for Growth Triangles

In recent years, while the significance of regional trade and trading blocs within Asia region (AFTA, APEC, ASEAN, SAARC, EAEC, etc.) has gained considerable interest among the policy-makers and researchers alike, tangible accomplishments, in terms of enhanced economic cooperation and trade liberalisation among the trading blocs, are still muted [Thant et al. (1998), p. 23]. Several reasons and problems have been cited for the limited success of these formal trading blocs, particularly in the Asia region, namely: (a) shortage of large volumes of internal and inter-regional trade; (b) absence of complimentary laws and regulations among the trading blocs in managing trade and investment flows; (c) inadequate transport and communication facilities and the lack of geographic proximity among many member countries; (d) presence of income disparities among several member countries may have negative effect on income distribution at the time of adjustments in trade flow; and (e) lack of political commitments and policy coordination among member countries. However, since the late 1980s, a new innovative genre of regional economic cooperation, bridging the differences between regional blocs and international trade, began to surface in the Asia region, which are now commonly known as “growth triangles” or, more appropriately, “growth zones” and they were also considered to be devoid of some of the predicaments noted above for regional trading blocs.

Is there a Phillips Curve in Pakistan?

Since the publication of A.W. Phillip's (1958) influential paper on the relationship between unemployment and the rate of change of the money wage rate, count• less studies have appeared to refine, reformulate and re-estimate structural equations explaining the rates of change in the wage rates and the price level or inflation rates. 1 The empirical findings of the Phillips curve relationships during the past two decades have been considered to be a contentious issue particularly in developed countries. 2 Despite the fact that the original hypothesis of the Phillips curve has been questioned and challenged,3 nevertheless, the importance of this subject has been preserved by its continued relevance for policy. Not only that, Friedman (1970, 1971) claimed that the Phillips curve plays the important role of the "missing equation" separating his own quantity theory of money from the Keynesian theory

Conceptual Framework for Growth Triangles

In recent years, while the significance of regional trade and trading blocs within Asia region (AFTA, APEC, ASEAN, SAARC, EAEC, etc.) has gained considerable interest among the policy-makers and researchers alike, tangible accomplishments, in terms of enhanced economic cooperation and trade liberalisation among the trading blocs, are still muted [Thant et al. (1998), p. 23]. Several reasons and problems have been cited for the limited success of these formal trading blocs, particularly in the Asia region, namely

Financial Sector Reform and Its Impact on Investment and Economic Growth: An Econometric Approach

The financial sector is central to economic development as it serves the role of intermediary by mobilising savings and subsequently allocating credit for productive activities. However, in many developing countries including Pakistan, administered interest rate, domestic credit controls, high reserve requirements, use of captive banking system to finance large budgetary requirements of the government and controls on international capital inflows have remained the main features of the monetary policy. These repressive policies had their repercussions in the form of excess liquidity with the banking system, disintermediation of cash flows, segmentation of financial markets, underdeveloped money and capital markets, etc. [McKinnon (1973) and Shaw (1973)], therefore, argued that low interest rate ceilings unduly restrict the real flow of loanable funds, thus depressing the quantity of productive investment. Financial liberalisation, on the other hand, is defined as policy measures designed to deregulate certain operations of the financial system and transform its structure with a view to achieving a liberalised market oriented system with an appropriate regulatory framework. The financial sector reforms would lead to increase in loanable funds by attracting more household savings to bank deposits due to higher interest rates. This, in turn, would result in greater investment and faster economic growth.

Integrated Social-sector Macroeconometric Model for Pakistan

While the traditional neoclassical production model postulates that it is the physical inputs such as private capital, labour, land, and technology that are the key determinants of output and economic development, in recent years, however, the social sector variables are also considered to be critical, particularly for the long-run sustainable growth of the economy. If fact, what has been argued in the form of “new growth theories” is that social variables (e.g., education, health, knowledge, etc.) generate “positive externalities” and, thus, may facilitate and foster the process of economic growth and development. Recently, the World Bank, based on a broad cross-country study, found some very interesting results in the above context. According to the World Development Report (1991): about fifty percent of the factor productivity contribution to output growth comes not from traditional physical inputs (capital, labour and land) but is a residual factor.

What Explains the Current High Rate of Inflation in Pakistan?

One of the most significant developments in the current economic scene in Pakistan has been the sharp increase in the rate of inflation. The annual average rate of increase in the wholesale price index (WPI) during the first seven months (July-January 1994-95) of the current fiscal year has been about 19 percent as opposed to 11.3 percent during the same period last year. A similar increase was also witnessed in the consumer price index (CPI) which accelerated to 13 percent as opposed to 11.1 percent during the previous period. Such a sharp increase in prices in recent months has not only caused alarm in the academic circles but has equally disturbed the country’s chief executive, the Prime Minister. The recent surge of inflation is a matter of serious concern for a variety of reasons. First, Pakistan has been a low-inflation country as it has experienced price stability during the last three decades. The rate of inflation, as measured by an increase in the WPI, averaged 2.6 percent during the 1960s. The components of the WPI, i.e., food, raw materials, manufactures, and fuel and lubricants, also grew by an average rate ranging from 2.0 to 3.4 percent p.a. during then 1960s (see Table 1 for relevant statistics). The rate of inflation crossed the single-digit threshold during the 1970s. The WPI and its components increased at an annual average rate ranging from 12 to 18 percent. The double-digit inflation during the 1970s has been the result of two major oil shocks, a massive devaluation of currency, and devastating floods destroying agricultural crops. Pakistan returned to the fold of the single-digit inflation during the 1980s. The rate of inflation remained at the single-digit level during the first three years of the 1990s with the exception of 1990-91, when the rate of inflation increased to 11.7 percent as a result of the Gulf War. It is only during the outgoing fiscal year and in the current year that the rising inflation is posing a major threat to macroeconomic stability.

Substitutability of Pakistan's Monetary Assets under Alternative Monetary Aggregates

This paper's main objective is to empirically investigate whether or not the use of the simple• sum aggregate is justified in the context of Pakistan's economy and also to determine the degree of substitutability of monetary assets