Trade Liberalization, Economic Size and Macroeconomic Volatility: Empirical Evidence from Pakistan
Trade Liberalization, Economic Size and Macroeconomic Volatility: Empirical Evidence from Pakistan

Summary/Abstract: The purpose of this paper is to investigate the link between trade liberalization, government size and the macroeconomic volatility in case of Pakistan. For this purpose, paper used time series data from 1967-2010 and employed co integration technique to find long run relationship. The results proposed that in long run trade liberalization and economic size create volatility in output. However consumption volatility is directly link with trade liberalization and government size. It is proposed that increase in trade liberalization and government size may reduce the investment volatility in long run. Furthermore error correction model suggested that in short run output volatility, trade liberalization, and economic size are negatively linked whereas government size directly linked with output, consumption and investment volatility in the short run.

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