Pakistan Journal of Applied Economics

149-172

Authors: Saidou Baba OUMAR*

This paper seeks to understand the economics of non-timber forest products, especially Eru (Gnetum) in the Southwest Region of Cameroon. It uses descriptive and econometric approaches on a stratified random sample of 400 participants, complemented with information from literature to capture the objectives of investigation. Results of the study indicate that the demand for Eru is own-price, cross-price inelastic, income elastic; positively related to quality and highly consumed by male than female breadwinner of households in the study area. The study further recognizes the impediments such as shortage of infrastructures, lack of proper sanitation, frequent coercion on participants while conveying the product to the market, absence of government support to participants; and potentials for international trade gains for Cameroon. Thus, it is recommended that Cameroon formalize the Eru-trade with importing countries that export other goods whose demand in Cameroon is elastic to improve its balance of payments position and increase its volume of exports and imports.

189-212

Authors: Naeem AKRAM*

Over the past few years most of the developing countries are facing hardship in collecting enough revenues to finance their budget. The situation of balance of payments is also not favouring the developing countries and the current account deficit is faced by them. Consequently twin deficits have emerged and the reliance on public external and domestic debt to finance the developmental activities have increased. The present study examines the consequences of public debt for economic growth and investment in Sri Lanka, for the period 1975-2014 by using the Autoregressive Distributed lag Model (ARDL) technique. The present study reveals that in Sri Lanka, public external debt has helped the process of economic growth; but debt servicing has a negative relationship to per capita GDP and investment. The external debt played a crucial role in development of this civil war which had hit the country; but however, debt servicing is a major concern in Sri Lanka. Domestic debt has positive and significant relationship with per capita GDP.

233-248

Authors: Faisal SHAHZAD,* Shahnaz A. RAUF** and Attiya Yasmin JAVID***

The paper, empirically investigates the impact of family control and audit quality on firms’ performance, over the period of 2007-2014 for the listed firms at the Pakistan Stock Exchange (PSE), using the Pooled OLS, Fixed effect, and Random effect model. For robustness, the case of reverse causality and cross sectional dependency is taken, using GMM, FGLS and PCSE regression methods. The findings suggest that higher audit quality and the family control are associated with higher firms’ performance and findings as these particular estimates are robust for alternative estimation techniques. Overall, the results support the argument presented by alignment hypothesis of agency theory, stewardship theory, resource based view of firms, and the socio-emotional wealth theory.

267-278

Authors: Muhammad SHAHID,* Mahmood SHAH** and Farhat PARVEEN***

The purpose of this paper is to investigate the macroeconomic factors empirically, which cause low level of foreign direct investment (FDI) inflows to Pakistan. This study aims to analyze the most effective role of governance and human capital along with other factors of FDI inflow. The Auto Regressive Distributive lag (ARDL) econometric technique to cointegration has been applied on time series data for the period of 1984 to 2012. The study shows the statistical significant and positive effect of governance and human-capital on FDI in short-run as well as in the long-run. It is the first study in research which has used 12 indicators of governance on FDI through composite index introduced by the International Country Risk Guide (ICRG), while none of the earlier studies have found such composite for Pakistan. This study would contribute a lot to economic literature, support planners, and the government to make policies which would raise the level of FDI inflow to Pakistan.

297-329

Authors: Wasim-ul-REHMAN,* Nabila ASGHAR** and Hafeez ur Rehman***

This study seeks to investigate empirically, the relationship of knowledge sharing (KS) practices, intellectual capital (IC) practices and performance within the banking organizations in Pakistan. It uses the amended instrument and attempts to collect data from 810 middle level managers through questionnaire of a sample of 42 banks. Structural equation model (SEM) and confirmatory factor analysis (CFA) were applied to assess the nature of relationship and overall fitness of the measurement models among the constructs. The results of confirmatory factor model reveal that all indices satisfactorily meet the thresholds which indicate a well fit of the models. Although, the results of standardized path coefficient postulates that KS and IC practices significantly contribute to banks’ performance; moreover results of standardized path coefficients reveals that human capital, structural capital, and relational capital practices, partially mediate the relationship between KS driven performance. Findings of the study support that all proposed hypotheses are statistically significant (p<0.001) which indicate that IC practices substantially mediate the relationship between KS driven performance; thus corroborating the argument that IC is a valuable strategic resource to leverage the performance based activities.

1-27

Authors: Syed Zakir Abbas ZAIDI*

Basically this is an empirical study which aims to test the Markowitz Modern portfolio theory (MPT) or the mean-variance analysis. Fund managers and general investors seek a portfolio that yields maximum return with minimum risk. The problem of investors is dual in nature, as Markowitz showed, i.e., the indifferent choice of risk and return. Though, diversification reduces non-systematic risk but due to limited resources one cannot afford to invest in all stocks, therefore it is pertinent to know that what should be the minimum level of stocks in a portfolio that produces maximum return and minimum risk. The theoretical framework of Markowitz MPT tested by computed 134 months expected the return of thirty two stocks, thirty-one variances and 465 co-variances, in order to evaluate efficient portfolio frontier.

41-66

Authors: Ghulam MOHEY-UD-DIN* and Muhammad Wasif SIDDIQI**

This paper studies the relationship between GDP fluctuations and long-run economic growth by using macro-panel approach (with small N and large T) in a panel of five selected South Asian countries (SSAC) including Bangladesh, India, Nepal, Pakistan and Sri Lanka, over a period of 1980-2010. For this purpose, modern non-stationary panel techniques such as the cross section dependence test, unit root test under cross sectional dependence, panel cointegration and Group Mean Fully Modified OLS (GM-FMOLS) estimation are applied. The study finds a significant long-run cointegrating relationship between GDP fluctuations and long-run growth in the SSAC and GM-FMOLS estimates and shows that this link is negative. It indicates that GDP fluctuations have a significant negative impact on long-run growth in the SSAC and these fluctuations of GDP may be detrimental for long-run growth in developing countries. Therefore, the governments of such countries shouldn’t rely on growth-oriented policies only but should equally focus on managing these fluctuations in GDP to achieve sustained and stable growth rate.

89-100

Authors: Ayaz KHAN* and Samina KHALIL**

Informal economy is an observable issue around the globe. Researchers of both the developed and developing countries are continuously investigating its different dimensions (size, determinants, etc). The current study is an attempt to estimate the real size of informality (underground economy) in Pakistan. For its estimation the real factors of economy like employment level, political stability, tax to GDP ratio and cost of working in informal economy are used, over a period (Time series) of 1972 to 2010. HP-Prescott filter method is utilized for obtaining the potential GDP and actual GDP series from the estimated GDP which is estimated through Feasible Generalized Least Square (FGLS)1 and then from these series informal GDP is estimated. About 71 per cent of the informality was found, in the case of Pakistan economy. The finding suggests that combating informality, the factors taken must be targeted properly.

121-138

Authors: Nabeela KOUSAR,* Muhammad Rizwan YASEEN,** and Imran QAISER***

The recent literature looks at correlation coefficients between the current exchange rate and the past and future values of trade balance. It is postulated that these coefficients are positive between the current exchange rate and the future trade balance values; but are negative between the current exchange rate and the past values of trade balance, resembling the S-curve pattern. For the first time this study, try to determine the existence of S-curve for aggregate trade and sixteen industries of Pakistan trading with the world. Industries representing the Scurve are less in number; hence, only the exchange rate depreciation is not a fruitful option to boost the trade balance.

107-128

Authors: Muhammad Tariq MAJEED* and Amina MALIK**

The growing importance of e-government and financial development has captured the attention of policy makers who are determined to enhance the per capita income of a country. This study aims to present new findings of the impacts of e-government and financial development on economic growth, using a cross sectional multi-year average dataset of 147 economies across the globe. To the best of the knowledge of authors, this is the first empirical research work which determines relationship between the economic growth and e-government, with particular focus on the role of financial development in shaping this relationship. The possible problem of endogeneity using both the internal and external instruments is also addressed in this study. Empirical findings suggest that growth impact of e-government is positive and significant while the direct growth impact of financial development turns out to be insignificant. However, the positive impact of financial development is explained thorough implementation of e-government as interactive term of financial development and the e-government which turns out to be positive and significant in all regressions. Findings of this study are not sensitive to control additional variables. The study concludes that economies of the world can significantly benefit from financial development if satisfactory quality of e-government can be assured.

153-181

Authors: Atif HUSSAIN* and Tahir SAEED*

The purpose of this study is to investigate the cointegration of stock market returns within and between the developed, emerging and frontier Asian countries for the period 1995 to 2014. The sub-periods including 1997-98 and 2008 to 2011 (crises periods) and 1995-96, 1999 to 2007, and 2012 to 2014 (tranquil periods) are also investigated. Applying the ARDL cointegration approach, the evidence of significant linkage within and between these Asian countries is obtained, over the long-run. Further, the ECM or the VAR techniques for the short-run dynamics, the short-term causal relationships of stock market returns, between most of the sampled Asian stock markets, are also used. It is also observed that those pairs of countries which do not show the stock market returns cointegration in the periods of tranquil; exhibit cointegration in the periods of financial crises, due to contagion or spillover of asset prices. The outcome of this study would be useful for economists, policy makers and investors to assess the international shocks and improve risk management and increase their portfolio diversification benefits.

231-238

Authors: Farrukh IQBAL**

The term inclusive development has become popular in the discourse and documents of the international donor community. While the concept is sometimes interpreted differently by different agencies there is a shared understanding that it has to do with a more broad-based pattern of development than has been attempted or achieved in most developing countries in the past few decades. The prominence of the concept is reflected in the fact that inclusion was adopted as an underlying principle of the Sustainable Development Goals (SDG) agenda which is to guide international and national development efforts till 2030 which succeeded the previous effort known as the Millennium Development Goals (MDG) agenda. The focus of the SDGs is not just on achieving gains in development on average but on ensuring that these gains are better distributed within the society. This also accounts for the wide range of SDGs that were adopted. The motivation behind the proliferation of goals was at least in part the desire to include items that were of great importance to some social groups, even if not of general importance to all. The SDGs thus differ from the MDGs in both breadth and depth. More goals are covered (breadth) and more goals have been specified in a way that encompasses distributional outcomes as well (depth).

1-14

Authors: Macleans MZUMARA* and Anna CHINGARANDE*

The authors investigate the inter-sectoral comparative and competitive advantages of South Africa using Balassa technique. South Africa demonstrates significant, comparative and competitive-advantages in chemicals and the allied industries, metals and machinery/electrical sectors. There are comparative and competitive disadvantages in foot wear/head gear sector. This sector is followed by raw hides, skin, leather, and fur sectors. Most of the sectors fall in the middle ranks and there is an evidence of substantial manufacturing in South Africa. It is recommended that South Africa should work on attracting new investment, especially the foreign direct investment to improve those sectors which fall in the middle ranks. It is also recommended that South African channel resources from sectors which lack comparative and competitive advantages to sectors with such advantages, to ensure specialization where South Africa’s productive capacities are efficient.

43-52

Authors: Faiza Azhar KHAN*

The paper questions the widely held assumptions about the relationship between absolute β-convergence and σ-convergence in the existing literature which states that β-convergence is a necessary condition for σ-convergence. The study utilizes the data of 136 countries for the period 1950 to 2008. The non-linear least squares estimations of the β-convergence regression, using both the cross-section and panel data, have confirmed no absolute convergence for the world sample. The σ-convergence has been studied using its two widely used measures, namely, coefficient of variation of income and standard deviation of log income. The results reveal that there is an evidence of σ-convergence using the former measure but not using the latter measure. These findings on β and σ convergence asserts that the relationship between β and σ convergence depends on the particular measure of σ-convergence being used, and hence, cannot be generalized. Specifically, contrary to the theoretical view of relationship between β and σ convergence, there is an evidence of σ-convergence without prevalence of β-convergence among the world countries.

135-159

Authors: Rafat MAHMOOD* and Eatzaz AHMAD**

The study measures an overall import smuggling in Pakistan, using Monetary Approach covering the period from fiscal years 1973 to 2010. The results show a rising trend in import smuggling as a percentage of imports in the early period of analysis but it declines afterwards. The main factor responsible for such a trend is trade restrictions; the tariffs and other import restrictions were imposed in 1970s through mid- 1980s and were relaxed later. The study paves the way for further research in this avenue by employing new approach for measurement of import smuggling in Pakistan.

179-192

Authors: Bilal MEHMOOD*, Muhammad ALEEM* and Nabeel SHAHZAD*

It is well said that “transport is civilization”. Transport sector plays a pivotal role in social and economic life of a country. A properly established transport system with well-equipped infrastructure is considered an input in the production process. A proficient transport system contributes to the economic growth by snow-balling the area of division of labor and specialization, accelerating the movement of raw material from their production centers to the place of their usage; as a result, it also enables the trade of goods from their manufacturing center to consuming centers between countries. A usefulness of transportation is that it helps in maintaining balance between areas where there is a shortage and those with surplus by exporting goods from the areas where there is a surplus to those areas where there is a shortage of goods. It stimulates integration of markets all over the world by reducing distance between countries. In this manner, it increases the comparative advantage of economy in goods production, and thus, facilitates trade. Transportation plays a pivotal role in connecting markets and the people. Recently, the world saw the birth of global economy which brought the national markets of different countries closer andmerged into a single global market due to technological advancement in the global transportation. It is impossible to put an economy on the high growth trajectory with an inefficient transport system. Air-transport is one of the major modes of contemporary transportation besides road and sea transportation. It is also known as “Real World Wide Web”. Air-transport plays its role in many sectors which ultimately contribute towards the national income of an economy. According to the Air-Transport Action Group (ATAG) 2012, if air-transport was a country, it would rank 19th in the world in terms of GDP, generating about US$ 540 billion worth of products and services per year. From this we can infer that there is a substantial role of air-transport sector towards the service-sector and in the economic growth. Air-Transport Action Group (ATAG) 2012, further points out that over 56 million people were employed world-wide in airtransport and the related tourism in 2011. By 2026, it is forecasted that air-transport will contribute about US$ one trillion to the world GDP. Based on these facts, it can be argued that air-transport is a sector which is capable of generating employment, product and services, stimulating growth. Therefore, empirically investigating its impact on growth for different countries is a worth-while task. In this paper, the study of macroeconomic impact of this mode of transportation is undertaken. Across-country framework for analysis of relationship between demand for air-transport and economic growth is also constructed. The rationale for considering Asian countries is that the strongest air-travel markets are in Asia with India and China’s domestic markets growing at double the rates. Within Asia the international travel is also growing strong. The objective of the paper is to build limitations of existing empirical research. The paper examines the impact of air-transport on national income of Asian countries, while considering the concerns which were previously overlooked in the empirical research. The hypothesis is HA, where there exists a long-run causal relationship between air-transport and macroeconomic performance in Asian countries. Following Section I (Introduction), Section II deals with the review of literature available on air-transport and its role in macroeconomic performance. Section III presents the theoretical framework, while the methodology is developed in Section IV. Empirical analysis is examined in Section V, and finally dicussion on recommendations on air transport are presented in Section VI.