Date of Award
Doctor of Philosophy (PhD)
Economics / Economic Policy
Professor F. T. Denton
This study analyses the growth prospects of Pakistan over the period 1978 to 1990. The framework used for the analysis is a macroeconometric model of the economy which is constructed and estimated based on data for the period 1956 to 1978. The predictive ability of the model is evaluated in terms of its ability to forecast values of the endogenous variables in an historic simulation context. The model is then used initially to forecast values of major endogenous variables over the period 1978 to 1990, based on a benchmark set of assumptions about growth in the exogenous variables. The results of the benchmark forecast are compared with results of six other forecasts in which the assumptions about the future course of key domestic and international factors are varied.
The macroeconometric model consists of a system of nonlinear dynamic simultaneous equations. An input-output block composed of ten production sectors is incorporated. The final demand side is disaggregated into private and public expenditures, including exports and imports by economic categories. The revenue structure and role of the government in the development of the economy are treated as endogenously determined. The influence of bank credit on capital formation and the effect of government deficits on the money supply are explicitly incorporated.
The results of the initial benchmark forecast with the model are compared with targets set by the Pakistan Planning Commission in the context of the Fifth Five-Year Plan (1978-83). It is found that the plan was consistent but was not feasible with regard to the amount of non-inflationary resources required to carry it out. For these reasons, the plan was aborted in 1981.
In the other experiments it is found that a higher international growth rate, though raising the growth path of the Pakistan economy, does not translate into an equivalent increase in growth in the domestic economy. The economy's growth path is found to be very sensitive to the course of agricultural development. A harvest failure in one year would permanently lower the growth path for subsequent years. The economy is found to be flexible enough to withstand a surge in imports in one year without its long-run growth path being affected. Finally, on the basis of the last experiment, a feasible course of action for government policy is suggested. This would require development expenditures to increase by half the amount suggested in the plan. Under this policy, gross domestic product and related aggregates would have annual real growth of 4.1 percent in the long-run accompanied by yearly increases in_employment of 3.3 percent. Government and balance of payments deficits would be cut to manageable size, resulting in reduced inflationary tendencies in the economy.
Khilji, Nasir Mahmood Khan, "Growth Prospects of a Developing Economy: A Macroeconometric Study of Pakistan" (1982). Open Access Dissertations and Theses. Paper 1561.