Exploring the role of Trade, Aid, Remittances and Financial Development in Pakistan (original) (raw)

In this paper, we explore the role of trade openness, overseas development aid (ODA), remittance inflows and financial development vis-à-vis income in Pakistan for the periods 1980-2010 using the bounds procedure within the augmented Solow-model approach. The paper finds that in the long-run, trade openness, ODA, and remittances have significant positive effect on income levels, while financial development is not statistically significant. In the short term, ODA has contributed positively towards income growth while remittances, trade openness and financial development have lagged, thus underscoring somewhat different behaviours of aid and remittance inflows. Accordingly, for development policy discourse, we emphasise the need of formalising and easing remittance transfers by minimizing transaction costs; promoting financial and mobile-led technology inclusion; further strengthening and cultivating public-private partnerships in developing necessary infrastructures and promoting investment; encouraging trade openness whilst exploiting areas of comparative advantages with an outward looking trade strategy; focusing on regional integration and co-operation in view of promoting trade in services (labour mobility); fortifying donor relations to ensure consistent flow of aid whilst effectively managing and deploying aid in productive infrastructure projects * Ronald Ravinesh Kumar is affiliated with the School of Economics in the Faculty of Business and Economics at the University of the South Pacific (USP), where he works as a Teaching Assistant. His area of research and publications include migration and development, capital inflows, financial sector development, ICT and economic growth in developing countries. Trade, Aid, Remittances and Financial Development: The Case of Pakistan J-SAPS Volume 02, Number 01 118