Macro Determinants of Total Factor Productivity in Pakistan

By utilizing the conventional growth accounting framework, this study first estimates the Total Factor Productivity (TFP) in Pakistan and then establishes its macro determinants. Covering the sample from 1960 to 2003, the results confirm that macroeconomic stability, foreign direct investment, and financial sector development play an important role in the increase of TFP. Interestingly, education expenditures turn out to be insignificant.Growth Accounting, Total Factor Productivity, Macro Determinants,Pakistan

Contextual Assessment of Women Empowerment and Its Determinants: Evidence from Pakistan

The main objective of this study is to evaluate women empowerment in different contexts of family planning and economic decision making within the household. Further this paper investigates its appropriate determinants sifting through sociology resource control theory and economic bargaining theory by controlling for socio-cultural intervening factors. We examine this empirically by utilizing extensive micro level data information (15,453 households) from ‘Pakistan Social and Living Standards Measurement Survey’ (PSLM) for the year of 2005-06. Results suggest the presence of highly constrained and largely dichotomous empowerment within the household. Interestingly, we find that the number of children however not the sex of a child relevant in enhancing women’s empowerment. Further, the common determinants of empowerment depict varying degree of effectiveness depending on the specific context of empowerment. Moreover, socio-economic, level of education and employment status of a woman depict as effect modifier factors across the empowerment contexts and regions. Furthermore, geographic divisions within Pakistan, significantly explain the contextual empowerment of women.Contextual empowerment; family planning decision making; economic decision making; socio-cultural; ordered logistic regressions.

A Small Open Economy DSGE Model for Pakistan

In recent years there has been a growing interest in academics, international policy institutions and central banks1 in developing small-to-medium, even large-scale, open economy macroeconomic models called Dynamic Stochastic General Equilibrium (DSGE) models based on new-Keynesian framework.2 The term DSGE was originally used by Kydland and Prescott (1982) in their seminal contribution on Real Business Cycle (RBC) model. The RBC model is based on neoclassical framework with micro-founded optimisation behaviour of economic agents with flexible prices. One of the critical assumptions of this model is that fluctuations of real quantities are caused by real shock only; that is, only stochastic technology or government spending shocks play their role. Later research in DSGE models however included Keynesian short-run macroeconomic features (called nominal rigidities), such as Calvo (1983) type staggered pricing behaviour and Taylor (1980) type wage contracts. Hence this new DSGE modeling framework labeled as new-neoclassical synthesis or new-Keynesian modeling paradigm. 3 This new approach combines micro-foundations of both households and firms optimisation problems and with a large collection of both nominal and real (price/wage) rigidities that provide plausible short-run dynamic macroeconomic fluctuations with a fully articulated description of the monetary policy transmission mechanism; see, for instance, Christiano, et al. (2005) and Smets and Wouters (2003). The key advantage of modern DSGE models, over traditional reduce form macroeconomic models, is that the structural interpretation of their parameters allows to overcome the famous Lucas critique (1976).4 Traditional models contained equations linking variables of interest of explanatory factors such as economic policy variables. One of the uses of these models was therefore to examine how a change in economic policy affected these variables of interest, other things being equal. In using DSGE models for practical purposes and to recommend how central banks and policy institutions should react to the short-run fluctuations, it is necessary to first examine the possible sources,5 as well as to evaluate the degree of nominal and real rigidities present in the economy. In advanced economies, like US and EURO area, it is easy to determine the degree of nominal and real rigidities as these economies are fully documented. In developing economies like Pakistan, where most of economic activities are un-documented (also labeled as informal economy, black economy, or underground economy), it is very difficult to determine the exact degree of nominal and real rigidities present in the economy. However, one can approximate results using own judgments and through well defined survey based method

Causality between Energy Consumption and Economic Growth in the Presence of Growth Volatility: Multi-Country Evidence

Falling energy intensity (increasing efficiency) is believed to be a result of more efficient production methods that have evolved over time, indicating overall sustainability in the production process. The objective of this study is to investigate the diminishing trend of energy intensity and the related volatilities in growth of energy consumption and income growth through the energy–growth nexus. The country specific long-run and short-run causal relationships among real energy consumption per capita, real GDP per capita, and the volatilities of growth in income and the growth in energy consumption are established using the method proposed by Yamamoto–Kurozumi within a cointegration framework in 48 countries. The overall findings suggest that energy intensity is falling, in conjunction with the existing evidence on the energy–growth nexus in most of the countries studied; hence, implicitly this confirms sustainability. The results based on volatility analysis show a significant decrease in energy use in response to increasing income growth volatility. The negative effects of income growth volatility on energy consumption are usually countered through compensation measures, with subsidies provided to households and producers in order to smooth the energy consumption behaviours in those economies

Macro Determinants of Total Factor Productivity in Pakistan

By utilizing the conventional growth accounting framework, this study first estimates the Total Factor Productivity (TFP) in Pakistan and then establishes its macro determinants. Covering the sample from 1960 to 2003, the results confirm that macroeconomic stability, foreign direct investment, and financial sector development play an important role in the increase of TFP. Interestingly, education expenditures turn out to be insignificant

An Analysis of Pakistan’s Vulnerability to Economic Crisis

The post 9/11 scenario in Pakistan’s economy can readily be identified with a host of positive developments. Real GDP growth rates have averaged around 6 percent since 2002, stock market surges have broken all the previous records, there is much more dynamism in the banking industry, capital flows are pouring into the economy, foreign exchange reserves have swelled to record high levels, and poverty has witnessed a declining trend. However, what mars these celebrations since last year is the scepticism of some market commentators on the growing vulnerability of Pakistan’s economy to crisis.1 The main weakness, as widely pointed out, remains the sustainability of current account deficit along with rising fiscal imbalances. A review of empirical literature on the determinants of currency crisis introduces a host of macroeconomic fundamentals broadly based on the predictions of the seminal first- and second-generation models. Although the list of these determinants varies from study to study, the consensus appears to be on the sustainability of external and fiscal positions as the main predictors of a crisis. An overview of the Pakistani fundamentals since 2000 reveals that broadly key Pakistani economic indicators do not give an immediate cause for concern. However, the emergence of primary budget balance as a deficit and the growing trade and current account deficits in the last two years does seem to be a cause for concern