Pakistan Journal of Applied Economics

71-101

Authors: Ashok PARIKH*

The estimation and forecasting of trade shares is attempted in a world framework for major trading countries on the basis of data on bilateral flows for the period 1965 – 1980 for manufactures and chemicals [Standard International Trade Classification (SITC), (5) to (8)J . The assumptions of separability and homotheticity are made to obtain an operational Hickman-Lau model from Armington's approach in which products are distinguished not only by their kind but by their place of production. The problem of heteroscedasticity is encountered and estimates of elasticities of substitution are obtained using the most general form of the mode1. The results are compared with the Gana, Hickman, Lau, and Jacobson (1979) study. The estimates of substitution elasticities based on 1965“ 1980 data are lower than the ones obtained using 1960- 1970 data and it is argued that the flexible exchange rate (and the agents' responses) could be responsible for low substitution elasticities when the period after 1973 is included.

125-129

Authors: A. Hafeez SHAIKH* & Asad ZAMAN**

The availability of computer packages has put a variety of econometric techniques within the reach of nearly everyone. The sophisticated mathematics and modern technology required lends a magical quality to these tools. One has the feeling that if only one could pronounce the right magic word (or, use the right regression technique) all econometric problems would disappear. The truth, as one learns from experience, is far from this fantasy . Because strong assumptions are made by econometric theory, it is not at all uncommon for the most sophisticated of techniques to generate the crudest of errors. Therefore it is extremely important to understand : a) The overall limitations of econometric techniques: what can and cannot be done; and b) factors not included in the model (such as politics, strikes, outliers) which may influence results.

1-23

Authors: Hafiz A. PASHA & Mir Anjum ALTAF*

This paper sets up a choice theoretic, dynamic optimization model in a life cycle setting, within which a temporary international migrant attempts to maximize a lifetime utility function. The choice variables are consumption at each point in time and the period of stay abroad. Determinants of the latter choice are the time stream of benefits and costs associated with migration. Benefits consist primarily of the jump in income levels. Costs comprise, first, of initial job-search and travel costs, second, of higher living costs abroad and, third, of 'psychic' costs due to family separation and cultural alienation. The model is applied to a data set of 417 Pakistani workers in Saudi Arabia. The impact of income 'shocks' of varying magnitude on planned lengths of stay abroad is simulated. It appears that the decline in wages has to be substantial, over 50 per cent, before, more or less, immediate large-scale return migration can commence to Pakistan.

41-60

Authors: Razaq A. OLOPOENIA

Despite the unprecedented inflow of foreign exchange into the Nigerian economy during the period of the oil boom in the seventies, the economy has been experiencing a balance of payments crisis and a recession since early 1982. While the glu t in the world oil market is often blamed for these problems their genesis is perhaps best sought within the context of the fiscal indiscipline and the exchange rate policy which characterized policy makers’ response to the oil boom. This paper examines the effects of these policy responses on certain macro-economic variables during the period 1972- 1984. It is observed that the evolution of these variables indicates that the Dutch Disease syndrome emerged during this period . Real output hardly grew ; real agricultural output declined ; non-oil exports, especially agricultural exports, lost competitiveness as a result of real exchange rate appreciation . The non-oil sector became more and more dependent on imports and a balance of payments crisis was imminent even before the 1982 oil market bust. It is argued that these developments could be directly traced back to the budgetary operations of the government through which the oil boom affected the rest of the economy. The policy of nominal exchange rate appreciation also contributed to the events which eventually led to an external debt crisis in the eighties. All of these happened because of the failure to make appropriate policy choices.