Pakistan Journal of Applied Economics

121-142

Authors: Imran Riaz MALIK* and Attaullah SHAH*

During the market turmoil, and later in the year 2008, the Securities and Exchange Commission of Pakistan (SECP) decided to discontinue the trading in single stock futures (SSFs) at the Karachi Stock Exchange (KSE). On 27th July 2009, trading in SSFs were re-launched in those stocks which passed the stringent criteria set by the SECP. While the overall market is in a transitional stage, there is a need to assess this new situation in order to improve and regulate the available futures contracts, as well as, the upcoming options contracts. In this vein, this study attempts to investigate the impact of parallel SSFs markets on the underlying spot market by examining whether the introduction of futures has played a role in destabilizing the market. The results suggest an insignificant change in coefficients used to gauge the market inefficiencies, feedback trading, trading volume, and volatility. This may imply that stringent contract specifications have helped to mitigate the potential destabilizing ability of SSFs.

159-177

Authors: Muhammad Shahid HASSAN,* Ayesha WAJID,* Qazi Muhammad IRFAN,* Muhammad Naveed TAHIR,* and Noman ARSHED* READ MORE

This study explores the price and non-price factors which affect the real imports in Pakistan. It considers the Bounds Testing Approach to investigate co-integration between the real imports and its factors in the long-run; and the Error Correction Model based on Bounds Testing Approach in order to find the impact of price and non-price factors on imports in the short-run, respectively. The findings reveal that real exchange rate per capita GDP, rural population, urban population, and money supply are among important factors which significantly accelerate the real imports in Pakistan, whereas, the domestic inflation have found to be depressing force for real imports. Moreover; the coefficients of factors of real imports were to be structurally stable for the selected sample period. Finally, the study suggests that it may not be appropriate to use the exchange rate policy from the perspective of imports to improve trade balance in Pakistan.

1-15

Authors: Ihtisham ul HAQ,* Mohammed Saud M. ALOTAISH,* Naradda Gamage Sisira KUMARA,* and Shavkat OTAMURODOV*

Considerably more commodities are available to consumers in open economies and openness brings these at cheaper rate, according to Rome’s hypothesis. The Johansen cointegration technique nullified Romer’s hypothesis that greater openness brings less inflation. Economic growth had significant positive impact on inflation, which is according to realm of Phillips curve and Okun’s law. Supply of money was also documented by positive effect on inflation, as the classical neutrality of money reveals. This study recommended that Sri Lankan government should be very careful in policies regarding supply of money and openness as it hurts consumers.

39-73

Authors: M. Tariq MAJEED* and Guangfeng ZHANG**

This study analyses the impact of trade on within-country inequality using a panel data set from 65 developing countries [see, Appendix (Table A-2)]. This study differs from the existing literature on distributional impact of trade by explicitly noting the importance of development stage in shaping the link. The analysis shows that the effect of trade on inequality depends upon the level of GDP-per-person (to some extent a proxy for economic development) of the trade-integrating economy. Among the developing economies, those with a high level of GDP-per-person enjoy a favourable effect of trade openness on income distribution, while the impact is unfavourable for those with low GDP-per-person. In sum, trade does not accentuate ameliorates inequality in developing countries with the low level of economic development – the opposite of the prediction of standard economics [Heckscher-Ohlin (HO) Model]. The HO model implies that free trade between labour-intensive (developing) and capital-intensive (developed) countries should lead to more specialization in labour-intensive products in developing and capital-intensive products in developed countries. This should bid up the price of labour, relative to capital in developing countries, and vice versa in developed countries, increasing inequality in developed countries and decreasing it in developing countries. The Stolper-Samuelson theorem has similar consequences. Findings of the study are robust to the sensitivity analysis, different estimators, inclusion of regional and time effects.