Margin: The Journal of Applied Economic Research, Volume 16, Issue 3-4, Page 392-432, August–November 2022.
The primary purpose of this study is to examine the impact of free trade agreements on trade volume and terms of trade between Pakistan and China. It examines the effect of the Pakistan–China Free Trade Agreement (PCFTA) on sector-wise trade welfare for both countries. Using the model of Lloyd and Maclaren, this study has quantified the trade welfare effect for both countries through trade volume, intra-union terms of trade and extra-union terms of trade in the context of PCFTA. The study concludes that the trade welfare increases for China and decreases for Pakistan after the complete execution of PCFTA. Also, there has been a trade creation for China and trade diversion for Pakistan by the PCFTA.JEL Codes: F15, F10, F13, I30, F60, F02
Category Archives: The Journal of Applied Economic Research
A Single Measure of Overall Export Performance
Margin: The Journal of Applied Economic Research, Volume 16, Issue 3-4, Page 278-308, August–November 2022.
Exports are a lifeline to a country’s growth, and an overall index can describe its export performance. However, there is little evidence of a single measure encompassing all the relevant aspects of exports. A composite and multi-dimensional measure can aid in assessing the relative position of a country in the world list and identifies necessary policy interventions. The article proposes an Overall Export Performance Index that satisfies the principles of index formation—monotonicity, time reversal, robustness and an unbiased approach. The proposed index avoids selecting weights and scaling variables. It facilitates the identification of crucial indicators requiring the attention of policymakers, tracking the progress of a country across time and the computing of mean and variance of the index for a group of countries at a given time. An empirical comparison of the USA and India reveals that India registered better overall export performance than the USA from 2015 to 2018. The results suggest India’s need for reforms in existing foreign trade policies.JEL Codes: F1, F10, F13
Exports are a lifeline to a country’s growth, and an overall index can describe its export performance. However, there is little evidence of a single measure encompassing all the relevant aspects of exports. A composite and multi-dimensional measure can aid in assessing the relative position of a country in the world list and identifies necessary policy interventions. The article proposes an Overall Export Performance Index that satisfies the principles of index formation—monotonicity, time reversal, robustness and an unbiased approach. The proposed index avoids selecting weights and scaling variables. It facilitates the identification of crucial indicators requiring the attention of policymakers, tracking the progress of a country across time and the computing of mean and variance of the index for a group of countries at a given time. An empirical comparison of the USA and India reveals that India registered better overall export performance than the USA from 2015 to 2018. The results suggest India’s need for reforms in existing foreign trade policies.JEL Codes: F1, F10, F13
Evaluating the Long-run Sustainability of India’s Fiscal Management with Structural Change
Margin: The Journal of Applied Economic Research, Volume 16, Issue 3-4, Page 367-391, August–November 2022.
Amidst output moderation, rising deficits and increasing debt, India’s macro-fiscal arithmetic witnesses severe strain and often invites downward rating pressures by sovereign rating agencies. The article aims to examine India’s fiscal sustainability during the past four decades employing time series integration and cointegration techniques, with structural breaks in a sequential schematic framework under intertemporal government budget constraints. It examines stationarity with exogenous and endogenous structure breakpoint(s) at the level and slope for government revenue and expenditure data-generating process following Narayan and Popp (2010), Lee and Strazicich (2003), Zivot and Andrews (1992) and Perron (1989). Furthermore, the cointegration vectors of these fiscal variables in Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS) and a generic cointegration framework following Gregory and Hansen (1996) with structural shifts confirm the sustainability of India’s fiscal management. However, a less-than-unity estimate of the DOLS cointegrating slope parameter with few exogenous breakpoints signifies a weak form of sustainability and hence emphasises a credible commitment to fiscal consolidation going forward for India.JEL Codes: C32, H50, E62, H62
Amidst output moderation, rising deficits and increasing debt, India’s macro-fiscal arithmetic witnesses severe strain and often invites downward rating pressures by sovereign rating agencies. The article aims to examine India’s fiscal sustainability during the past four decades employing time series integration and cointegration techniques, with structural breaks in a sequential schematic framework under intertemporal government budget constraints. It examines stationarity with exogenous and endogenous structure breakpoint(s) at the level and slope for government revenue and expenditure data-generating process following Narayan and Popp (2010), Lee and Strazicich (2003), Zivot and Andrews (1992) and Perron (1989). Furthermore, the cointegration vectors of these fiscal variables in Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS) and a generic cointegration framework following Gregory and Hansen (1996) with structural shifts confirm the sustainability of India’s fiscal management. However, a less-than-unity estimate of the DOLS cointegrating slope parameter with few exogenous breakpoints signifies a weak form of sustainability and hence emphasises a credible commitment to fiscal consolidation going forward for India.JEL Codes: C32, H50, E62, H62