Assessing the Role of Exports and Imports with the OECD In Pakistan’s Economic Performance

Abstract

This study examines the impact of imports from the OECD and exports to the OECD on Pakistan’s economic growth using annual data from 1976 to 2023. The Autoregressive Distributed Lag (ARDL) model is employed to analyse both long-run and short-run relationships. The long-run findings indicate that exports to the OECD positively contribute to economic growth, supporting the export-led growth hypothesis, while imports from the OECD negatively affect GDP, likely due to trade imbalances and import dependency. Exchange rate depreciation is found to have an adverse impact on growth by increasing import costs and inflationary pressures. Moderate inflation fosters economic expansion, but prolonged inflation hinders growth, while financial sector development supports GDP, though inefficiencies in credit allocation reduce its effectiveness. Gross fixed capital formation does not exhibit a strong long-run impact, suggesting a need for improved investment efficiency. The error correction term is negative and significant, confirming he presence of a stable long-run equilibrium. The CUSUM and CUSUMSQ tests confirm the model stability, reinforcing the reliability of the findings. Based on these results, policy recommendations include export diversification, strategic import substitution, exchange rate stabilization, inflation management, financial sector reforms, and efficient investment planning. These measures will enhance economic resilience, foster industrial development, and support sustainable growth in Pakistan.