An Analysis Of The Impact Of Globalisation On Macroeconomic Performance In Pakistan

This study is devoted to analyze the impact of Globalization on macroeconomic performance (Economic Growth, Unemployment and Exchange rate). Opening up of economies are usually considered as an effective policy for accelerating economic growth and employment generation. Like many other developing economies, Pakistan has also moved towards Globalization.There are several challenges occur during the description, measure and the period selection because of its multi-dimensional nature. It has economic, social and political dimensions.Therefore it is not precisely defined and measured. Different views were observed about the start of globalizationâ€™s waves (Spans). Pakistan started Globalization the early 1980 with the help of worldâ€™s leading institutions World Bank and International Monetary Fund with the import liberalization (reduction in tariff and removal of non-tariff barriers) during Ziaâ€™s regime.The next issue is the measure of economic Globalization; different measures are used in the literature. Widely it was measured by trade transaction and capital flow.This study based the measure of globalization used by Afzal (2007) with little distinction.The impact of Globalization on macroeconomic performance has been empirically investigated over the period of 1980-2010, by employing the recent developed econometric technique of ARDL co-integration.The results of the study indicate that Globalization positively contributed to economic growth.Trade openness significantly affect while financial affect insignificantly in both the long and short runs.The impact of gross domestic investment and human resource development is insignificant in the long run, while GDI affect significantly growth in the short run. Trade liberalization boosts economic growth significantly in both the long and short runs. The result of the unemployment model shows that Globalization affect unemployment differently. Trade openness affect unemployment negatively and significantly (increase in trade openness leads to decrease in unemployment) in the long run while insignificant in the short run and financial integration positively and significantly affect unemployment rate (increase in financial integration leads to increase unemployment rate) in both short and long run. The overall impact of Globalization on unemployment is negative in Pakistan.The impact of controlled variable PG is insignificant in both the short and long run and the impact of other controlled variable GDI is insignificant in the long run while negative and significant in the short.The result of Real Exchange Rate model indicates that Globalization measures leads to increase real exchange rate (PAK/US). The increase in real exchange rate means the depreciation in real exchange rate (Pak rupee depreciated against US Dollar). The impact of financial integration is more impressive both in term of the coefficient and significance level. The Globalization measure affect insignificantly in short run.The impact of controlled variable TOT is positive and significant in both the short and long run.Government consumption has no significant contribution in the exchange rate determination in both short and long run.Huge trade liberalization in the globalized period is significant and positive in short as well as in the long run.It is concluded that the overall impact of globalization is positive on macroeconomic performance in Pakistan.This study is in line with the conventional wisdom (theoretical literature classical and neo classical theories) and empirical literature.Literature were of the view that Globalization enhance economic growth through the following channels provides, it provides the opportunity to adopt advanced and sophisticated technology from developed countries, opening of the domestic economy reduced the chance of over production and increase employment opportunities by increasing labour demand, access to foreign capital in debt crisis.Therefore, Globalization works as a transmission belt for developing countries to achieve economic development. Globalization depreciated the real exchange rate of the country, depreciation of the real exchange rate also improve economic growth (Rodrik 2007) in developing countries by encouraging export sector of the economy.The current study highlights the role and importance of Globalization for Pakistan economy.Pakistan should pursue relevant policies to get advantages of the current beneficial process of Globalization