The impact of agriculture trade and exchange rate on economic growth of Pakistan: an NARDL and asymmetric analysis approach

Ali, Imad; Khan, Imran; Ali, Hashmat; Baz, Khan; Zhang, Qiangqiang; Khan, Ajab; Huo, Xuexi

doi:10.1590/0103-8478cr20190005

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AGRIBUSINESS • Cienc. Rural 50 (4) • 2020 • https://doi.org/10.1590/0103-8478cr20190005 copy

The impact of agriculture trade and exchange rate on economic growth of Pakistan: an NARDL and asymmetric analysis approach

O impacto do comércio agrícola e da taxa decâmbio no crescimento econômico do Paquistão: uma abordagem de análise NARDL e assimétrica

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT:

This study contributes to the extant literature on the nexus among agriculture export, import exchange rate and economic growth in Pakistan. We used annual time series data for 1980-2017 and employ the Non-linear Autoregressive Distributed Lag (NARDL) model. The NARDL testing results affirms asymmetric co-integration among the variables. The study main results show: (i) Co-integration test for long run the positive shocks in export and import have positive significant while exchange rate has positive effect the economic growth. (ii) Co-integration test for short run the positive shocks in import has positive significant and while Export and exchange rate have negative significant effect on economic growth. The symmetrical results show: (i) Export has unidirectional granger causality (ii) Exchange rate has bidirectional granger causality (iii) Import has not ganger causality with economic growth. In addition, the results demonstrated that causality relationship can help out policy maker to design such policies which are useful to economic growth of Pakistan, which could further promote foreign trade to gain the maximum level of economic growth.

Key words:
economic growth; agricultural export products; agricultural import products and exchange rate; NARDL; asymmetric relationship; Pakistan

Universidade Federal de Santa Maria Universidade Federal de Santa Maria, Centro de Ciências Rurais , 97105-900 Santa Maria RS Brazil , Tel.: +55 55 3220-8698 , Fax: +55 55 3220-8695 - Santa Maria - RS - Brazil
E-mail: cienciarural@mail.ufsm.br

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[1] E-mail: xuexihuo@nwsuaf.edu.cn. ^*Corresponding author

Variables	--------------------------------ADF-------------------------		---------------------------------PP---------------------------
	Level	1^st Difference	Level	1^st Difference
Y _t	-2.1139	-9.1011^***	-2.3303	-8.1759^***
I _t	-4.6114^***	-8.4713^***	-4.6420^***	-9.0486^***
Et	-4.7579^***	-8.8804^***	-4.9103^***	-12.4683^***
X _t	-3.2281^*	-9.2433^***	-3.7640^**	-8.5641^***

Test	Results	Test	Results
L_I ⁺	0.4371	L₁ ^-	-0.7514
L_E ⁺	-0.0393	L_E ⁺	-0.2021
L_X ⁺	-1.1329	L_X ^-	-10.5207
W_I.R.E	4.9253^**	W_S.R.I	5.8589^***
W_I.R.E	0.1298	W_S.R.E	2.3653^*
W_I.R.X	7.3838^***	W_S.R.X	19.3038^***
R²	0.9562	ADJ-R²	0.8945
X² _HET	35.3575[0.0633]	D-W	2.6985
F_PSS	5.700^***	T_BDM	14.7102^***

Variables	Coefficient	Probability
Constant	1.27846^*	0.0745
$Y_{t - 1}$	-0.1400^*	0.0683
$I_{t - 1}^{+}$	0.0612^*	0.0604
$I_{t - 1}^{-}$	-0.1052^**	0.0521
$E_{t - 1}^{+}$	-0.0055	0.9386
$E_{t - 1}^{-}$	-0.0284	0.6494
$X_{t - 1}^{+}$	-0.1586	0.1790
$X_{t - 1}^{-}$	-1.4729^***	0.0026
${∆ Y}_{t - 1}$	-0.1608	0.1748
${∆ Y}_{t - 2}$	0.3995^**	0.0181
${∆ Y}_{t - 3}$	0.3651^**	0.0170
${∆ I}_{t}^{+}$	0.0721	0.1024
${∆ I}_{t}^{-}$	-0.1421^***	0.0081
${∆ I}_{t - 1}^{-}$	-0.1506^***	0.0014
${∆ I}_{t - 2}^{-}$	-0.1090^**	0.0206
${∆ E}_{t}^{+}$	-0.0862^*	0.0740
${∆ E}_{t - 1}^{+}$	-0.1377^**	0.0180
${∆ E}_{t - 2}^{+}$	-0.0867^**	0.0374
${∆ E}_{t}^{-}$	0.0795	0.1704
${∆ E}_{t - 2}^{-}$	-0.0995^**	0.0486
${∆ E}_{t - 3}^{-}$	-0.0881^*	0.0672
${∆ X}_{t}^{+}$	-0.9893^***	0.0000
${∆ X}_{t - 2}^{+}$	0.4982^**	0.0171
${∆ X}_{t - 3}^{+}$	0.7634^***	0.0016

No	Causalities	Values	Probabilities
1.	$E_{t} \Rightarrow Y_{t}$	41.2131^***	0.0000
2.	$E_{t}^{+} \Rightarrow Y_{t}^{+}$	26.0084^***	0.0010
3.	$E_{t}^{-} \Rightarrow Y_{t}^{-}$	34.3197^***	0.0000
4.	$Y_{t} ⇏ E_{t}$	70.1372	0.5219
5.	$Y_{t}^{+} \Rightarrow E_{t}^{+}$	13.8195^*	0.0866
6.	$Y_{t}^{-} ⇏ E_{t}^{-}$	9.5311	0.2995
7.	$I_{t} ⇏ Y_{t}$	7.2552	0.5094
8.	$I_{t}^{+} \Rightarrow Y_{t}^{+}$	19.1181^**	0.0142
9.	$I_{t}^{-} \Rightarrow Y_{t}^{-}$	13.5922^*	0.0930
10.	$Y_{t} ⇏ I_{t}$	8.7441	0.3636
11.	$Y_{t}^{+} ⇏ I_{t}^{+}$	7.0651	0.5296
12.	$Y_{t}^{-} \Rightarrow I_{t}^{-}$	26.5906^***	0.0008
13.	$X_{t} \Rightarrow Y_{t}$	20.0018^**	0.0103
14.	$X_{t}^{+} \Rightarrow Y_{t}^{+}$	20.3262^***	0.0092
15.	$X_{t}^{-} \Rightarrow Y_{t}^{-}$	14.2360^*	0.0758
16.	$Y_{t} \Rightarrow X_{t}$	29.4081^***	0.0003
17.	$Y_{t}^{+} ⇏ X_{t}^{+}$	5.0559	0.7516

No	Causalities	Values	CV 1%	CV 5%	CV 10%
1	$E_{t} \Rightarrow Y_{t}$	5.925**	8.455	4.425	3.104
2	$E_{t} \Rightarrow Y_{t}$	7.885*	13.771	13.771	6.609
3	$E_{t}^{-} \Rightarrow Y_{t}^{-}$	0.323	13.061	7.639	5.599
4	$Y_{t} ⇏ E_{t}$	0.393	10.684	6.856	5.116
5	$Y_{t}^{+} \Rightarrow E_{t}^{+}$	0.506	12.729	7.608	5.794
6	$Y_{t}^{-} ⇏ E_{t}^{-}$	6.095	20.371	11.707	8.871
7	$I_{t} ⇏ Y_{t}$	13.324^**	17.958	11.933	9.094
8	$I_{t}^{+} \Rightarrow Y_{t}^{+}$	7.005*	14.260	9.056	6.872
9	$I_{t}^{-} \Rightarrow Y_{t}^{-}$	0.011	14.022	7.700	5.390
10	$Y_{t} ⇏ I_{t}$	1.870	10.895	6.745	5.038
11	$Y_{t}^{+} ⇏ I_{t}^{+}$	0.462	12.484	7.579	5.784
12	$Y_{t}^{-} \Rightarrow I_{t}^{-}$	4.591	22.612	11.926	8.710
13	$X_{t} \Rightarrow Y_{t}$	3.928	12.545	8.069	6.119
14	$X_{t}^{+} \Rightarrow Y_{t}^{+}$	1.091	14.752	9.208	7.070
15	$X_{t}^{-} \Rightarrow Y_{t}^{-}$	68.690^***	26.585	13.430	10.004
16	$Y_{t} \Rightarrow X_{t}$	2.324	12.845	8.468	6.459
17	$Y_{t}^{+} ⇏ X_{t}^{+}$	2.334	14.489	9.539	7.404
18	$Y_{t}^{-} \Rightarrow X_{t}^{-}$	2.200	11.817	6.956	5.088