THE IMPACT OF TRADE LIBERALIZATION ON DEMAND AND PRICE VOLATILITY IN PAKISTAN: CO INTEGRATION APPROACH FOR COMPENSATION HYPOTHESIS
Journal Title: Asian Economic and Financial Review - Year 2014, Vol 4, Issue 6
Abstract
The important modification of the compensation hypothesis rests on the principle; increased trade openness increase the domestic economic volatility. The economic theory recommend increase of international trade require integration into huge, even markets, and involve risk diversification, in fact it may support rather than reduce stability. By the same indication, however, economic theory also suggests that smaller economies should familiar with greater levels of volatility than larger economies, this study quantify the relationship proposed in case of Pakistan containing dataset since 1966-2009. The verification presented here suggests that the level of domestic economic volatility is not only because of international trade integration, there are some other factors too; however trade integration may have eased rather than emphasizing on creating domestic economic volatility.
Authors and Affiliations
Hira Mujahid| Applied Economics Research Center, University of Karachi, Karachi, Shaista Alam| Applied Economics Research Center, University of Karachi, Karachi
Keywords
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