...RESEARCH IN BUSINESS EFFECT OF TRADE DEFICIT ON THE ECONOMY OF PAKISTAN Mohsin Abbas Superior University, Lahore, Pakistan Hassan Raza (Corresponding author) University of Lahore, Lahore, Pakistan Abstract This study has conducted to find the effects of trade deficit on the economy of Pakistan in which trade deficit is the independent and gross domestic product, foreign direct investment exchange rate are the dependent variables. Depending on the availability of data we have selected the longest possible sample period to avoid the small sample bias. A sample period of 24 years has been selected for this study for the period of 1988-2011 with annual frequency. We use histogram, scatter plot matrix and the correlations ordinary least square method of regression has been used for the analysis.Histogramof exchange rate show rupees value against U.S dollar are continuously decrease. FDI is also not good, Gross domestic product (GDP) of the Pakistan is also very low trade,In histogram also represent the trade volume (TV) in which imports of Pakistan is very high while export is low. Scatter plot show the positive relationship dependent and independent variables except trade volume. So its result shows if the government working on these variables then trade deficit should automatically decrease like 2003 and 2004 in which our export are more as compare to import .correlation coefficient of trade deficit with gross domestic product, foreign direct investment, exchange rate has shown...
Words: 14436 - Pages: 58
...Effect of FDI on Bilateral Trade Abstract Contemporary literature refers to trade and Foreign Direct Investment (FDI) as alternative strategies. The debate is mainly between two notions: (1) that FDI displaces trade, and (2) that FDI and trade complement each other. Literature on FDI talks about the effect of foreign investments on trade. Lipsey (2002) mentions that outward FDI may decrease or increase (or have no effect on) exports of home country. These effects depend largely on the competitiveness of the host country and the motives behind investment by the home country in the host country. This paper is aimed at studying the effect of FDI on bilateral trade as well as effect at the aggregate level especially in the developed-developing nation paradigm. Introduction Literature suggests that there are a number of motives on which FDI takes place across nations. Most of the firms in the developed countries will go for foreign investment once they fulfill their domestic market and they in order to grow will go to foreign market. In this case the main motive of a firm is to tap new markets. This entry of one firm in to a foreign market will create a bandwagon effect thorough which their competitors will also enter that market. Again, when the competition sets in the foreign market, companies will be forced to take cost reduction measures to achieve higher profits will look for other destinations which have lower cost of production and thus the motive will become efficiency...
Words: 4808 - Pages: 20
...Chapter 2 International Flow of Funds Lecture Outline Balance of Payments Current Account Capital and Financial Accounts International Trade Flows Distribution of U.S. Exports and Imports U.S. Balance of Trade Trend International Trade Issues Events That Increase International Trade Trade Friction Factors Affecting International Trade Flows Impact of Inflation Impact of National Income Impact of Government Policies Impact of Exchange Rates Interaction of Factors Correcting a Balance of Trade Deficit Limitations of a Weak Home Currency Solution International Capital Flows Distribution of DFI by U.S. Firms Distribution of DFI in the U.S. Factors Affecting Direct Foreign Investment Factors Affecting International Portfolio Investment Agencies that Facilitate International Flows How Trade Affects an MNC’s Value Chapter Theme This chapter provides an overview of the international environment surrounding MNCs. The chapter is macro-oriented in that it discusses international payments on a country-by-country basis. This macro discussion is useful information for an MNC since the MNC can be affected by changes in a country’s current account and capital account positions. Topics to Stimulate Class Discussion 1. Is a current account deficit something to worry about? 2. If a government...
Words: 3380 - Pages: 14
...Foreign Direct Investments should rather be welcome and taken advantage of by both developing and developed countries to foster economic development and growth, absorb better technology and management tecchniques, lower cost of funds, better global exposure and improve international competitiveness. However, only for reasons of security and eliminate money lundering strict vigil on the sources of foreign investment should be checked, there should not be over-dependence on FDI (% of FDI to total domestically financed investment should not be very high and should decline to a lower limit as the economy develops, and FDI should be encouraged to remove domestic monopolies and foster competion in all markets. In the book "Does Foreign Direct Investment Promote Development?" edited by Theodore H. Moran, Edward M. Graham, and Magnus Blomström, (ISBN paper 0-88132-381-0 • May 2005 • 440 pp • $28.95), one can get the latest empirical research on the subject. Studies of the linkage between foreign direct investment and development have produced confusingand sometimes contradictory results. Some have shown that foreign direct investment (FDI) spurs economic growth in the host countries; others show no such effect. Some find spillover benefits to the host economy—that is, benefits not appropriated by investors or in the form of superior wages—while others do not discern these benefits. A new book from the Institute for International Economics, Does Foreign Direct Investment Promote Development...
Words: 850 - Pages: 4
...e Table of Content Declaration of Originality 2 Acknowledgements 3 Introduction 4 Economic Integration: Definition 5 Background of Free Trade in the South Pacific 6 PICTA 7 PACER 7 Advantages and benefits of Economic Integration 9 Drawbacks of Regional Economic Trade 11 Resolution 15 Conclusion 17 Bibliography 18 Appendices 19 Declaration of Originality We declare that this is our original work and all borrowed works had been cited and referenced. s11061729 Elizabeth Pearl Blakelock s11074679 Ranjeeta Devi s93005349 Mosese Vosarogo Acknowledgement We acknowledge our Instructor Mr Atishwar Pandaram for for the learning, Mr William Kurt of Cost-U-Less for allowing us time to interview him and for the valuable information and also Mr Aslam Janiff of Kundan Singh Supermarket and Andrew Powell Rajendras FoodTown Supermarket for giving their time to attend to us. Introduction In this project, we will attempt to highlight the implications of free trade amongst the south pacific island countries that are under the auspices of the 'The Pacific Islands Forum'. PIF is an inter-governmental organization that aims to enhance cooperation between the independent countries of the Pacific Ocean...
Words: 5104 - Pages: 21
...the high rate of development brought some unexpected effects as well. As a consequence, China government implemented a series of policies to alleviate the adverse effects, including raising interest rates. This essay will firstly examine economic situation of China in 2007, and then discuss interest rate as a policy tool and its application. In addition, it will also explain whether raising interest rates were justified by the economic conditions then. Finally, it will analyze how interest rates can affect the economy and whether raising interest rates might work in the context of China’s economy in 2007. To simplify the problem, this essay will mainly focus on raising interest rates and omit or take little account for other monetary policies. In general, China’s economy kept increasing rapidly. GDP increased by 11.4% in 2007 (World Bank Office Beijing, January, 2008), and it was far higher than the world average rate. Among it, 40% of GDP relied on export market (King, 2007). However, there were some points to be noticed. Primarily, China’s economy in 2006 had profound effects on that in 2007. Although investments were cooled by the contractionary policy in the 4th quarter of 2006, the trade surplus compensated the adverse effects, and the foreign exchange reserves increased as well (World Bank Office Beijing, February, 2007). The People’s Bank of China (PBC) was concerned about the influence that was brought by the trade surplus when allowing for the liquidity. According...
Words: 1400 - Pages: 6
...Alimatou TRAORE Concept Application essay #1 International Trade- IBS390 Summer 2015 International Trade and Foreign Direct Investment Introduction 1. International Trade, what is it? 2. FDI : Definition and different types 3. Impacts of FDI( Foreign Direct Investment) on International Trade 4. Costs and Benefits of FDI( Foreign Direct Investment) Conclusion Introduction The world economy has developed over the past few decades in a great manner, regarding investment in particular and the way multinationals enterprises are now investing in the developing world to increase their production, assets, and interconnected market networks. Individuals everywhere in the world turn out to be closer than ever before. Goods and services available in one nation A will be instantly promoted in another country B or C. Universal exchange and communication became more basic. This current situation is called Globalization. Globalization is at the same time the primary cause and effect of the incredible growth of International Trade over the past decades. Thanks to International Trade, consumers around the world enjoy a wider range of products than they would if they only had access to domestically made products. 1. International Trade, what is it? International trade simply refers to the movement of goods and services across borders. This activity gives rise to a greater competition and more competitive pricing in the market. However let’s not...
Words: 736 - Pages: 3
...structural adjustment programme in collaboration with the IMF and World Bank. The governments in the developing world, believes that it is more desirable to globalize which simply means to open up the economy and penetrate international markets. In time past, the world economy has undergone a fundamental shift towards an integrated and coordinated global division of labour in production and trade. In the 1950s and 1960s, productions were within national boundaries. The increase of oil prices in the late 1970s and the contractionary monetary policies of the United States during 1979 and 1982 period led to the increased interest rates and consequently indebted developing countries found they unable to service their debts. Continual refinancing was the only way to avoid default. By the end of the mid 1980s, there were both internal and external balances. Globalization is a term that is frequently used but seldom defined. It refers to the increase in the share of economic activity taking place across national boundaries. It is usually driven by a push towards liberalization of trade and investment regime. It minimizes the...
Words: 10565 - Pages: 43
...Globalization; Its Drivers and Effects Globalization, in the most basic sense, can be defined as a trend in which countries across the globe are joining economically. Hill (2009) describes the major facets of globalization to include the globalization of markets and the globalization of production. The globalization of markets is a result of merging local and national markets to create one somewhat homogenous “global” market whereby the individual preferences of regions, or nations, have converged. On the other hand, the globalization of production has allowed firms to split their operations internationally. As a result, each stage of production for these firms takes place in countries around the world in areas where work can be accomplished at the lowest cost. The decrease in international trade and investment barriers and advancements in technology have served as the major drivers of globalization. Furthermore, Hill (2009) identifies that globalization has had an effect on the demographics of the global economy. This paper provides an analysis of the major drivers and effects of globalization and recognizes some of international trade theories that support the need for a global economy. Drivers of Globalization The first major driver influencing the spread of globalization is the decline in barriers to free trade. Since the end of World War II, the advanced nations of the West have advocated the free flow of goods, services, and capitol between nations. Hence, the General...
Words: 581 - Pages: 3
...qwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwer...
Words: 7187 - Pages: 29
...Preferential Trade Agreements Frequently Asked Questions Monographs on Globalisation and India Myths and Realities, #14 ABC of Preferential Trade Agreements Frequently Asked Questions Monographs on Globalisation and India Myths and Realities, #14 Published by CUTS Centre for International Trade, Economics & Environment D-217, Bhaskar Marg, Bani Park Jaipur 302 016, India Email: citee@cuts.org Website: www.cuts-international.org/www.cuts-citee.org Researched and compiled by Kritika Kapil* Printed by Jaipur Printers P. Ltd. Jaipur 302 001 © CUTS International, 2009 * Research Assistant, CUTS CITEE Niru Yadav, Senior Research Associate, CUTS International contributed to this Monograph. #0914 Contents Preface .......................................................................................................... i Introduction ............................................................................................... iii 1. 2. 3. 4. 5. 6. 7. 8. 9. What is a PTA? What are the Different Types? ............................ 1 What has led to the Growth of PTAs? .......................................... 5 How have PTAs Evolved? ............................................................ 6 How are PTAs Inconsistent with GATT Rules? ............................ 9 What are Rules of Origin? ........................................................... 11 What are Negative and Positive List Approaches? ..................... 13 What are the Effects of PTAs...
Words: 9744 - Pages: 39
...international trade. The financial crisis began in the United States in 2007 in the housing market resulting in foreclosures. The crisis continued to grow and eventually turned into a global financial crisis as well as an economic crisis. As a result, some major banks, insurance companies and investment houses faced bankruptcy while others needed financial aid to continue operating. Many businesses involved in the international trade have been struggling in their financial management during the credit crunch because a business is supposed to remain successfully even during crisis times. The managers in businesses involved in the international trade have had to make decisions to help their organizations stay afloat during the financial crisis. Economists are of the opinion that a financial crisis results from feeble economic fundamentals for instance, fiscal deficit, reduced foreign reserve and increased foreign debt among others. The financial crisis eased in 2009 but its effects were felt globally. The effects on the international trade occur because of the trade links among countries at the global market through a contagious effect (Glick & Rose, 1999). The contagious effect means that when a financial crisis occurs in a country it creates a crisis in another country even if that other country has sound economic fundamentals. The financial crisis affects international trade greatly and this paper will focus on the effects of a financial crisis on the international trade and barriers...
Words: 3597 - Pages: 15
...enterprises in other countries. This current wave of globalization has been driven by policies that have opened economies domestically and internationally. According to Stanford encyclopedia of philosophy, since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating new opportunities for international trade and investment. Governments also have negotiated dramatic reductions in barriers to commerce and have established international agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities in foreign markets, corporations have built foreign factories and established production and marketing arrangements with foreign partners. A defining feature of globalization, therefore, is an international industrial and financial business structure. This process has an influence on many aspects of life. This includes but not limited to culture, education, health, trade, environment, technology and investment. CULTURE Culture plays a significant part of globalization. Many people around the world are coming to question the impact that the worldwide expansion that globalization is...
Words: 2833 - Pages: 12
...We are all Forever Alone, that's the reason why you always should look for us when you need somebody to love because we are Forever and Fully Available - We are also Fascinatingly Adorable, Fantastically Amazing b.Connection to the subject: - The name F.A refers to Financial/Foreign Aid, a very important part of International Economics, involved in International Trade as well as International Movements of Factors (which are, in this case, International Investment and International Technology Transfer), when capital and other resources flow to the less developed countries for help. 2. Definition of FDI: There are two concepts of FDI and two matching ways of measuring it. One is that FDI is a particular form of the flow of capital across international boundaries from home countries to host countries. These flows give rise to a particular form of international assets for the home countries, specifically, the value of holdings in entities, typically corporations, controlled by a home country resident or in which a home country resident holds a certain share of the voting rights. The other concept of direct investment is that it is a set of economic activities or operations carried out in a host country by firms controlled or partly controlled by firms in some other (home) country. These activities are, for example, production, employment, sales, the purchase and use of intermediate goods...
Words: 3981 - Pages: 16
...of Sessions: 24 Office Ext: 236, 269 Course Overview/objective: There are new realities that are critical for today’s students to embrace with the remarkable changes that are taking place in the cross border flow of products, services, capital, technology and people. Today both the volume of international trade and the level of firms’ internationalization are increasing at a fast pace creating newer opportunities and challenges for business. With this fact in mind, this course has been designed to prepare the future managers to grasp and comprehend the economic forces behind international business operations (as for instance -why does international trade take place? or why do firms invest overseas?) and the economic consequences of such operations( as for instance effect of international trade on production and consumption or effect of international trade on exchange rates. The contents of the course will familiarize the students with various fundamentals of international economics theory and also understand the linkages between these economic concepts and their implications for business. (As for instance the creation of a regional trade block and its implications for various sectors of business in the integrating countries) One of the premises for a successful international business is the proper choice of countries. With the aim of creating a basic understanding of business environment in some major economies as US ,EU and China ,the course also deals...
Words: 1400 - Pages: 6
