At the time of furnishing this bulletin, Pakistan has seen a successful democratic transition with Pakistan Tehreek-e-Insaaf forming its government in the center. The manifesto of the incoming party stresses greatly on the importance of trade, particularly export competitiveness. The new Prime Minister during his initial interactions with the public also emphasized on the importance of peace and harmony in the region and that (regional) trade remains a low hanging fruit. The new government is also set to face challenges related to the management of macro economy. While some uptick in exports has been seen during the quarter under discussion, however import bill along with a ballooning fiscal deficit have resulted in growing financing needs, depleting foreign exchange reserves, and pressures on Pakistani Rupee.
This volume covers subject areas such as: A Two-Sector General Equilibrium Model of a Small Open Economy; Non-Traded Goods and Tourism in the Pure Theory of Trade; Tourism, Taxes and Immiserization in a Two-Country Trade Model; Guest Workers and Resident Immiserization; Terms of Trade and Resident Welfare; and Growth in a Dynamic Model of Trade
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A paradox in international trade is that multilateral trade liberalisation has resulted in increases in both the volume of world trade and the amount of foreign direct investment (FDI). This note presents a Cournot duopoly model with two regions, each consisting of two countries, and with an inter-regional transport cost. It is shown that multilateral trade liberalisation may lead firms to switch from exporting to undertaking export-platform FDI when the interregional transport cost is high. Also, when the inter-regional transport cost is high, the switch to FDI leads to an increase in the volume of world trade in this industry.
This paper offers new insights on a central question in trade and development economics: does increased exposure to foreign competition generate gains in plant productivity? We find that it does. We examine Colombian trade policy from 1977 to 1991, a period during which trade liberalization alternates with increased trade protection in varied ways across industries, to investigate the link between trade policy and plant productivity. Using a rich panel of manufacturing plants, we obtain production function estimates separately across industries that are consistent in face of the simultaneity between input demands and productivity. These estimates are used to derive plant-level time-varying productivity measures for which a systematic component related to trade policy is identified. We find a strong negative impact of nominal tariffs on plant productivity controlling for observed and unobserved plant characteristics and industry heterogeneity. The use of lagged tariffs and the evidence on the political economy of tariff determination in Colombia allow us to argue that the negative impact of tariffs is unlikely to reflect the endogeneity of protection. Plant exit plays a minor role in generating productivity gains in face of lower trade protection. Also, accounting for variation in the Colombian peso's real exchange rate does not weaken the main findings. The negative impact of trade protection on productivity is stronger for large plants relative to small plants, as measured by employment and market shares. The negative impact of trade protection on productivity is stronger for plants in less competitive industries according to Herfindahl indexes and turnover rates. The main findings are robust to the use of effective rates of protection and import penetration ratios as measures of trade protection and openness. Finally, we also find evidence of a negative impact of trade protection on the rate of growth of plant productivity.