Abstract
In this study we estimated the regional Macro econometric-trading model for Pakistan. Where we defined the region by taking the
countries as Pakistan, India, Sri Lanka and Bangladesh. We took China as the major trading partner in this study. Our query was to
estimate the macroeconomietric model at the regional level and see if regional variables are playing a role in cross regional
macroeconomic performance and should they be considered while making policies. We developed a number of variables by taking
their regional weights. We constructed production, aggregate demand, trade and aggregate supply block respectively. We used GMM
for estimating the model and since we have number of equations will use system GMM. Since we have time series data, we tested
the time series properties through Panel ADF for the variables and saw that there was different order of integration, hence we
proceeded to see the short and the long-term relationships by applying ARDL and ECM within system GMM. We took the data from
1971-2015. From the results in most cases Macro variables are affected by the regional variables. But in our model China, as a
singular country did not affect regional variables, although gets affected by them. So, it could be deduced that policy makers do need
to consider how regional variables act and should be considered by policy makers to create policies accordingly
Sahar Arshad Mahmood, Ahsanul Haq, Mahmood Khalid. (2020) Regional Macroeconomic Model for Pakistan, Paradigms , Vol 14, Issue 1.
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