A structural VAR analysis of the impact of macroeconomic shocks on Pakistan's textile exports |
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| Institution: | 1. Lahore School of Economics, Intersection Main Boulevard Phase VI DHA and Burki Road, Burki, Lahore, 53200, Pakistan;2. University of Leicester, University Road, Leicester, LE1 7RH. United Kingdom;1. College of Mathematics and Information Science, Yulin Normal University; Guangxi Colleges and Universities Key Lab of Complex System Optimization and Big Data Processing, Yulin 537000, China;2. Huipu high school, Linhai 317000, China;3. College of Mathematics and Information Science, Guangxi University, Nanning 530004, China;1. DRM Finance, Université Paris Dauphine, Place du Maréchal de Lattre de Tassigny, 75775 Paris Cedex 16, France;2. IPAG Business School (IPAG Lab), 184 Boulevard Saint-Germain, 75006 Paris, France;1. Department of Economics, Chuo University, 742-1 Higashi-Nakano, Hachioji, Tokyo 192-0393, Japan;2. Department of Applied Mathematics, University of Pécs, Ifúság, u. 6, H-7624 Pécs, Hungary |
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| Abstract: | This paper creates a structural vector autoregression (SVAR) model which looks at the macroeconomic factors that impact the export of both finished and unfinished Pakistani textiles between 1980 and 2011. The analysis is unique in two ways: first, it separates unfinished (low value-added) textile exports from finished (high value-added) textile exports; second, it separates out the impact of aggregate exchange rate changes with respect to trading ‘partners’ from aggregate exchange rate changes with respect to trading ‘competitors’. We find that unfinished, or low value-added, Pakistani textile exports were positively impacted by the aggregate consumption of trading partners while finished, or high value-added, textile exports were negatively affected by these shocks. Also, a real depreciation of the Pakistani exchange rate leads to temporary increases in unfinished textile exports but sustained increases in the level of finished textile exports. Finally, positive shocks in the textile exports of competitor countries lead to temporary decreases in both unfinished and finished Pakistani textile exports, but these falls were followed by eventual increases in the exports of both. |
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