Accessing the Role of Macroeconomic Policies on Export and Growth Relationship - A Case of India and Pakistan

Abstract

The relationship between exports and growth has extensively been discussed in the literature. We have plenty of theoretical as well as empirical literature highlighting this relationship. This study, however, has been conducted in an attempt to explore the impact of the macroeconomic policies of two major South Asian economies on exports and growth.

To see the impact of these policies, a policy index has been constructed incorporating the fiscal, monetary, and trade policies by using their proxy variables: budget balance, inflation, and trade openness respectively. Johansen Cointegration technique under VAR has been employed on annual data from 1980–2021.

The result suggests that macroeconomic policies have no role in promoting either exports or growth in Pakistan. However, there was evidence that sound macroeconomic policies have promoted exports and growth in India.