CAUSAL NEXUS BETWEEN IMPORTS AND ECONOMIC GROWTH IN PAKISTAN: EVIDENCE FROM TODA-YAMAMOTO CAUSALITY TEST

Abstract

Growth in the level of imports shows a strong domestic demand and a rising economy, particularlywhen these imports are productive and useful assets. However, there is a dearth of research carried on the relationship between GDP growth and imports. This research used Toda-Yamamoto Causality to investigate how imports affect Pakistan's economic growth. The years 1972 through 2020 are covered by yearly time series data. The study's findings suggest a long-run equilibrium relationship with bidirectional causality between imports and real GDP growth in Pakistan. Thus, it is proven that increasing imports will spur GDP growth in the long run. Whereas, in the short run true economic growth may result in an increase in the country's import demand. For a growing country like Pakistan, these two findings are very significant given the current scenario.