Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) October 2015 Vol. 4(9), pp 363-372

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Original Research Articles

Globalization and Macroeconomic Stability in Pakistan  (1980-2010)

Dr Sher Ali, Mukamil Shah, Shahid li

Department of economics Gomal University, Pakistan February, 2013.

Corresponding author Email: ali_820423@yahoo.com

Accepted 19 September 2015

Abstract 

This research work is committed to investigate empirically the impact Globalization on instability in Pakistan. The term instability is measured by well-known concept Misery-index (MI). MI is represented by the combination of two major macroeconomic problems unemployment and inflation. ARDL is employed to assess the required impact for the period of 1980-2014. Globalization is a multidimensional phenomenon therefore it is a challenge to identify and measure it. Economic dimensions of globalization are taken into account. Economic components of globalization are trade and capital flow. The first aspect is measured by trade and the latter aspect by the net capital outflow as % to GDP, and some additional variables are also added to the model which have important role in the determination of stability. The estimated results suggested that the impact of globalization on stability is am little ambiguous, because the impact of trade openness significant and with positive sign, means increase in trade openness leads to increase instability in Pakistan, while the impact of financial openness is negative and significant in the long run. The increase in financial openness decrease instability. The short run results shows that globalization negatively affect instability (increase in globalization leads to decrease instability). The overall impact of globalization on instability is somehow dubious. To get benefited from the rich and opportunistic process of globalization, the Government of Pakistan should pay special attention toward open and liberal policies regarding trade to correct the negative aspect of trade relating activities and must formulate more suitable financial policies to get more and more benefits. The process of globalization with adequate policies will certainly benefit economic stability in Pakistan.

Keywords: Globalization, Economic Instability, ARDL, Pakistan.