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GHULAM ABBAS
GHULAM ABBAS

This document presents the theoretical framework and methodology for a study examining the relationship between economic growth and imports in Pakistan. It outlines the model specification, hypotheses, variable definitions, data collection sources, empirical evidence, and conclusions. The study finds a positive relationship between economic growth and total imports, but a negative relationship between growth and capital imports, suggesting capital imports represent an outflow of cash from the domestic to foreign economy. Overall, the study concludes that while imports may harm domestic industries, they can still contribute to increased overall economic growth for a country.

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Amer Abbas Ghulam Abbas M.Adil Maqsood Kaleem Ullah Israr Ahmed
THEORETICAL FRAMEWORK Introduction This chapter deals with the mechanics of the problem under investigation. Therefore, it deals with the research site, the study procedures, theoretical framework, and specification of model and definition of variables. METHODOLOGY. The theoretical relationship between imports and economic growth tends to be more complicated than that between exports and growth. The demand for imports is determined by both economic and non-economic factors.
The purpose of this study is to provide an empirical test of the causal relationship between economic growth and imports, especially categories of imports, which are investment goods imports, raw material imports, consumption goods imports and other goods imports. The focus is Pakistan because recently Pakistan has lived an economic growth with a large current deficit. So, it is wondered if an economic growth causes an increase in imports or import expansion causes the economic growth.
This paper differs from the previous studies in that way; import is decomposed to determine the dynamic relationship between import categories and economic growth, comparing with the relationship between total import and economic growth.
Model specification Y=F (L, K, X) Y stands for GDP L and K respectively stand for the input of labour and capital factors X stands for the amount of imports and actually it is a variable added to original production function. Labour force, capital and GDP is not a linear relation but an exponential relation, but it can be translated into linear relation by taking logarithm and a specific model of multiple linear regression is as follows: Y= 硫0 + 硫1L + 硫2K + 硫3X +亮
HypothesesHypotheses # 1 H0: Reject HA: Accept H0: There is no significant relationship between GDP and Labour. HA: There is significant relationship between GDP and Labour. Hypotheses # 2 H0: Reject HA: Accept H0: There is no significant relationship between GDP and CAPITAL. HA: There is significant relationship between GDP and CAPITAL.
Hypotheses # 3 H0: Accept HA: Reject H0: There is significant relationship between GDP and IMPORTS. HA: There is no significant relationship between GDP and IMPORTS.
DEFINITION OF VARIABLES GDP growth The market value of final goods and services newly produced with in a nations boundaries during a fixed period of time. The GDP growth is the dependent variable because it has influence by the other variable. Labour The aggregate of all human physical and mental effort used in creation of services. Labor is a primary factor of production. The size of a nation'slabor force is determined by the size of its adult population, and the extent to which the adults are either working or are prepared to offer their labor for wages.
Capital Factors of production that are used to create goods or services and are not themselves in the process, like machines. Imports The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country, it include imports of the primary products like raw material.
DATA COLLECTION METHODS AND SOURCES Data for this study is collected from secondary sources like; books, report and internet. The data collected is given a proper setup with the help of applying research tools and procedures. To obtain secondary data the sources like web- site and publications of state bank of Pakistan, journals and website of ministry of finance, and federal bureau of statistics, library books and IFS etc.
Empirical evidence Y=硫0 + 硫1L + 硫2K + 硫3X +亮 Y= -25587.93+2049.112L-0.028932K+1.067639X Interpretation Dependent variable = GDP Independent variable = CAPITAL, LABOUR AND IMPORTS 硫0 = Intercept 硫1= coefficient of labour. 硫2= coefficient of capital. 硫3= coefficient of imports. Values of 硫0 =-25587.93 硫1= 2049.112 硫2= -0.028932 硫3= 1.067639
1% increase in labour leads to 2049.112% increase in GDP; by taking other factors are constant, and we say that there is positive relationship between labour and GDP, And 1% increase in capital leads to -0.028932% decrease in GDP, we say that there is negative relationship between capital and GDP,And 1% increase in imports leads to 1.067639% increase in GDP,and there is positive relationship between imports and GDP
Ols estimation Dependent Variable: GDP Method: Least Squares Date: 05/28/12 Time: 08:55 Sample: 1980 2007 Included observations: 28 Variable Coefficient Std. Error t-Statistic Prob. C -25587.93 3152.315 -8.117186 0.0000 L 2049.112 109.2836 18.75040 0.0000 IMP 1.067639 0.364938 2.925539 0.0074 CAPITAL -0.028932 0.029335 -0.986238 0.3339 R-squared 0.989750 Mean dependent var 60045.18 Adjusted R-squared 0.988468 S.D. dependent var 21932.52 S.E. of regression 2355.234 Akaike info criterion 18.49823 Sum squared resid 1.33E+08 Schwarz criterion 18.68855 Log likelihood -254.9752 Hannan-Quinn criter. 18.55641 F-statistic 772.4609 Durbin-Watson stat 0.831716 Prob(F-statistic) 0.000000
CONCLUSIONS The aim of this study is to check the impact of imports on economic growth. In this study we find that there is positive relationship between economic growth and imports. One percent increase in the real GDP due to 1.69 % increase in imports. There is negative relationship between economic growths and capital to the imports, it means the capital is imports from the foreign countries the cash is outflow from domestic to foreigner. This means that there is negative relationship between the imports of capital and economic growth.
Finally the study conclude that the imports are the harmful for the domestic industries the reason is that increase the supply of goods the domestic consumption is shift and demand for the foreign goods are increase. But in a country the overall growth performance is increase.
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  • 3. Amer Abbas Ghulam Abbas M.Adil Maqsood Kaleem Ullah Israr Ahmed
  • 4. THEORETICAL FRAMEWORK Introduction This chapter deals with the mechanics of the problem under investigation. Therefore, it deals with the research site, the study procedures, theoretical framework, and specification of model and definition of variables. METHODOLOGY. The theoretical relationship between imports and economic growth tends to be more complicated than that between exports and growth. The demand for imports is determined by both economic and non-economic factors.
  • 5. The purpose of this study is to provide an empirical test of the causal relationship between economic growth and imports, especially categories of imports, which are investment goods imports, raw material imports, consumption goods imports and other goods imports. The focus is Pakistan because recently Pakistan has lived an economic growth with a large current deficit. So, it is wondered if an economic growth causes an increase in imports or import expansion causes the economic growth.
  • 6. This paper differs from the previous studies in that way; import is decomposed to determine the dynamic relationship between import categories and economic growth, comparing with the relationship between total import and economic growth.
  • 7. Model specification Y=F (L, K, X) Y stands for GDP L and K respectively stand for the input of labour and capital factors X stands for the amount of imports and actually it is a variable added to original production function. Labour force, capital and GDP is not a linear relation but an exponential relation, but it can be translated into linear relation by taking logarithm and a specific model of multiple linear regression is as follows: Y= 硫0 + 硫1L + 硫2K + 硫3X +亮
  • 8. HypothesesHypotheses # 1 H0: Reject HA: Accept H0: There is no significant relationship between GDP and Labour. HA: There is significant relationship between GDP and Labour. Hypotheses # 2 H0: Reject HA: Accept H0: There is no significant relationship between GDP and CAPITAL. HA: There is significant relationship between GDP and CAPITAL.
  • 9. Hypotheses # 3 H0: Accept HA: Reject H0: There is significant relationship between GDP and IMPORTS. HA: There is no significant relationship between GDP and IMPORTS.
  • 10. DEFINITION OF VARIABLES GDP growth The market value of final goods and services newly produced with in a nations boundaries during a fixed period of time. The GDP growth is the dependent variable because it has influence by the other variable. Labour The aggregate of all human physical and mental effort used in creation of services. Labor is a primary factor of production. The size of a nation'slabor force is determined by the size of its adult population, and the extent to which the adults are either working or are prepared to offer their labor for wages.
  • 11. Capital Factors of production that are used to create goods or services and are not themselves in the process, like machines. Imports The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country, it include imports of the primary products like raw material.
  • 12. DATA COLLECTION METHODS AND SOURCES Data for this study is collected from secondary sources like; books, report and internet. The data collected is given a proper setup with the help of applying research tools and procedures. To obtain secondary data the sources like web- site and publications of state bank of Pakistan, journals and website of ministry of finance, and federal bureau of statistics, library books and IFS etc.
  • 13. Empirical evidence Y=硫0 + 硫1L + 硫2K + 硫3X +亮 Y= -25587.93+2049.112L-0.028932K+1.067639X Interpretation Dependent variable = GDP Independent variable = CAPITAL, LABOUR AND IMPORTS 硫0 = Intercept 硫1= coefficient of labour. 硫2= coefficient of capital. 硫3= coefficient of imports. Values of 硫0 =-25587.93 硫1= 2049.112 硫2= -0.028932 硫3= 1.067639
  • 14. 1% increase in labour leads to 2049.112% increase in GDP; by taking other factors are constant, and we say that there is positive relationship between labour and GDP, And 1% increase in capital leads to -0.028932% decrease in GDP, we say that there is negative relationship between capital and GDP,And 1% increase in imports leads to 1.067639% increase in GDP,and there is positive relationship between imports and GDP
  • 15. Ols estimation Dependent Variable: GDP Method: Least Squares Date: 05/28/12 Time: 08:55 Sample: 1980 2007 Included observations: 28 Variable Coefficient Std. Error t-Statistic Prob. C -25587.93 3152.315 -8.117186 0.0000 L 2049.112 109.2836 18.75040 0.0000 IMP 1.067639 0.364938 2.925539 0.0074 CAPITAL -0.028932 0.029335 -0.986238 0.3339 R-squared 0.989750 Mean dependent var 60045.18 Adjusted R-squared 0.988468 S.D. dependent var 21932.52 S.E. of regression 2355.234 Akaike info criterion 18.49823 Sum squared resid 1.33E+08 Schwarz criterion 18.68855 Log likelihood -254.9752 Hannan-Quinn criter. 18.55641 F-statistic 772.4609 Durbin-Watson stat 0.831716 Prob(F-statistic) 0.000000
  • 16. CONCLUSIONS The aim of this study is to check the impact of imports on economic growth. In this study we find that there is positive relationship between economic growth and imports. One percent increase in the real GDP due to 1.69 % increase in imports. There is negative relationship between economic growths and capital to the imports, it means the capital is imports from the foreign countries the cash is outflow from domestic to foreigner. This means that there is negative relationship between the imports of capital and economic growth.
  • 17. Finally the study conclude that the imports are the harmful for the domestic industries the reason is that increase the supply of goods the domestic consumption is shift and demand for the foreign goods are increase. But in a country the overall growth performance is increase.